Wednesday, November 16, 2016

Noob question, but how does buying shares in a company allow you to share in its future profits?

Hey everyone, I'm trying to work out what the point of buying stocks is.

When a company issues new shares, it receives money for them. It can use this money to invest in itself. But after the company sells these shares, any change in the price of the shares would have no change on how much money the company has.

Similarly, regardless of whether or not a company is performing well, the price of its shares can go up or down depending on market forces. I understand that market forces tend to track a company's profits (i.e. the higher a company's profits, the higher its share price), but WHY?

How does buying shares allow you to share in the future profits of a company? Assuming that a company doesn't pay dividends, the only way you can see a positive return is if you sell your shares at an increased price. But what does this have to do with a company's profits?

I know this is probably really dumb but I must be missing something!

Thank you!



Submitted November 16, 2016 at 10:26PM by AgentSilver http://ift.tt/2g0GsJJ

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