I just got into the stocks market. AFAIK every transaction must have someone selling and someone buying, both thinking that they will be making money. How can both be making money?
Does that mean at least half of everyone in the stocks market will have to be losers?
In: 97
Many wrong answers in this thread.
As a means of wealth transfer the market is great.
You sell someone buy, you feel rich. But in aggregate you two lost money on this transaction because frictional costs (fees for banks etc). individual feels wealthier but as an aggregated group you don’t win or lose anything beside the frictional cost.
However, corporations do dividends and stock buy backs and sometimes liquidation. Which is where the wealth is created, this is where the aggregated group gets wealthier.
A market cap of a company should essentially be what that company earns over its lifespan. This is what is hard to figure out and the speculation price gets far off at times and closer at other times.
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