Re: Shouldn\'t all stocks trade at discount to company value?
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If all stocks traded at discounts, then the market's returns would be greater than the market's returns, which can't happen in this universe.
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but if they continue trading at that same percentage discount in the future, the returns will be the same...
some counterarguments to the OP:
- if you own whole companies that individually make up a significant part of your net worth, you're exposed to more risk. several smaller investments that diversify your risk will be "worth more" to you, even if their expected value is slightly lower. the biggest companies (market caps in the hundreds of millions) are worth many times the richest individual's net worth, so the "true value" can never be realized.
-liquidity increases a company's value. if you own the whole thing, how are you going to find buyers at the "true value"? if you need to liquidate, the company is only worth what you can sell it for.
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