why are shareholders expected return to investment every time when money isn’t infinite and infinite growth isn’t possible

Question

Like you can’t expect everything to be a success and money isn’t infinite. Infinite growth can’t exist, especially for all shareholders around the world. And yet they expect full return on their investment whereas companies should focus on their clients who buy their products and employees who want to help the company and be rewarded but yet the bosses only seen to focus on making shareholders happy. There seems to have been a shift in this mindset somehow over the decades.

It’s naive on my part and it’s more complicated than what I wrote, but I’m curious and I would like to understand. Thank you for your help!

In: Economics

Answer 1

You assumptions are not correct. Investors don’t expect infinite growth. They don’t even always expect “full return on their investments”.

More typically, an investor might split their investment into different assets. Maybe some parts in real estate, some parts in high growth tech companies, some parts in precious metals like gold, some parts in cash, some parts in government bonds, or even in crypto currencies.

For each investment part, they are weighing the *probability* of making a profit vs. the *risk* of losing some money.

Put it another way, they expect to win some and lose some — but they try to have a good mix of investments such that *over the long term* they might eek out more wins than losses.

Venture capital investors may be an extreme example of this. They fully expect maybe 90% of their investments would fail / lose money. Not only zero profits, but potentially losing their investments completely. However they also hope that the remaining 10% of their investments might win big, making up for the losses.

Investments are not static. Today I might invest in Apple. Tomorrow I might pull my investments from Apple (because I don’t think they’ll continue to make profit) and maybe put the money to Walmart instead.

So it’s not true that investors expect particular companies to always make money. In fact, sometimes investors might fear that the majority companies will start losing money, and they might shift large parts of their investments out from companies and into safer instruments like government bonds.