Why is buying stocks considered investing?
I don’t understand why investing in stocks in the secondary market is often considered investing, and why industry people/lobbyists act like it would actually benefit the respective company/economy.
Am I wrong?
Maybe ask yourself why it would be bad that people couldn’t or don’t buy stocks. I think you’ll pretty quickly realize it’s a good thing we have functional capital markets that can be accessed by the general public.
Yeah I agree, I just wondered why buying a stock from company A is considered investing in Company A.
Buying a stock from a third party (i.e. your neighbor) doesn’t provide cash to the company. Owning that equity, and being able to sell it for a higher price in the future, benefits only you. Having a robust, liquid stock market allows for individual investors to be able to make decisions with large amounts of capital (see: velocity of money).
Purchasing stock directly from a company, either in an IPO or a follow-on, provides a cash sum to the company (or sometimes underwriter, but let’s say company for sake of simplicity). This is obviously a good thing because then the company can reinvest the $ they’ve raised and you can earn interest on your equity stake. Equities become more valuable as the company performs better.
Not really sure what else is being asked.
Buying STONKS is not about benefitting the company, it's about benefitting the people who are invested (individuals, pension funds, endowment funds, hospitals, sovereign wealth, etc.)
On the company side, this is fuzzier but you increase liquidity for those who want to sell (i.e. insiders) & you keep mgmt / the company more accountable
Even though you are buying a stock on the secondary market, you are directly supporting the company.
When you buy stock, you are bidding up the company’s valuation, or market cap. Whenever a company has a higher valuation, it can more effectively raise more capital (I.e., follow-on, secondary, private placement) which should help it take on greater NPV projects in theory.
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