Why is the stock market a positive sum game?
 

not sure if this is the right forum but w/e.

Can someone explain to me how the stock market and the trading of stocks benefits all of those are involved? From the little knowledge I have of it, it would seem to be a zero sum game...can someone clear this up for me?

Re: Why is the stock market a positive sum game?
 

the underlying businesses are generating profits on net. those profits ultimately go to the shareholders.

Re: Why is the stock market a positive sum game?
 

because more people are born

Re: Why is the stock market a positive sum game?
 

Markets CREATE wealth because share prices rise and that rise in price is objectively based.
IE: If a public company has a float of 100m shares and today the market values it at $1 but tomorrow the market values it at $2 100 million dollars has been CREATED

Re: Why is the stock market a positive sum game?
 

True... but the intrinsic reason is that the company itself is creating additional value in the form of products that translate to earnings, which increase the intrinsic value of the company. This is then hopefully reflected in the share price.

As long as companies continue to make money and the market goes up, the market will be long term positive sum.

Re: Why is the stock market a positive sum game?
 

Population increases + productivity increases + inflation = average long term market return

Re: Why is the stock market a positive sum game?
 

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Population increases + productivity increases + inflation = average long term market return

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ah good ol macroeconomic theory

Re: Why is the stock market a positive sum game?
 

you are basically loaning a company money to be used for any number of reasons....use for salaries, new buildings, machines, etc....(positive for them) and in turn they work to generate a profit which they return either through a dividend if they have a more stable cash flow or they return money throught the increasing stock price...the fact that their company is starting to make more profits make the stock more attractive to investors and when those investors buy the stock demand becomes greater than supply and the stock price moves up (positive for us)

Kinda just rambled but you get the point

Re: Why is the stock market a positive sum game?
 

Bing - You aren't really 'loaning' the company money exactly, that makes it sound more like you're buying a bond. When I buy 100 shares of microsoft, I'm buying someone else's fractional ownership in the company.. and entitled to future cash flows/ dividends etc. But the company doesn't get my money unless I'm buying an IPO- the 100 MSFT shares have probably belonged to 10 or 20 different people before me.

Re: Why is the stock market a positive sum game?
 

yes you are right....alot of times you are buying shares from a larger institutional holder that has bought a huge sum of shares for a price cheaper than the current market price and they then sell the shares in a retail fashion...thanks for the correction