Is it a bad thing to get money for nothing?
Dan's comments have certainly got me thinking. I do want to be an ethical investor. I want to make money in a way that honours God.
I also want to make a "quick buck!"
Is it possible to do both?
I find this comment about speculating especially unsettling: "It doesn't contribute or add anything positive to society, it just aims to skim off the profits that other people have worked for."
I've been very focussed on trying to build up my savings. I wanted to have a buffer for the situation I now find myself in, being out of work, and also provide for my own and my families future.
Making money on the stock market seemed like a way I could do this while working. This is my perception of the stock market:
1. Companies sell shares to allow them to build up their companies and make more profits. once those shares are initially sold, through an Initial Public Offering, companies do not receive any more money from the buying or selling of shares. Unless of course they release more shares through a rights issue.
2. If I buy shares, I am not buying them from the company. I am buying them from a previous holder of those shares. I buy them because I think the shares in that company are undervalued or that the company is growing in such a way that the share value will increase.
3. If the company grows in value, my shares will be worth more. I can keep those shares as long as I want. If I feel there is unlikely to be further growth in the value of that company's shares, I can sell those shares. Hopefully I will sell at a profit.
I recently bought shares in Ferrexpo PLC (FXPO.L). At some point in the past, Ferrexpo floated on the stock market and used the share capital raised to fund a massive expansion in its operation. Somebody or some institution bought shares in Ferrexpo at that time and contributed to the building up of that company. Then, later on, that shareholder decided they no longer wanted those shares and for whatever reason decided to sell. I'm fairly certain they made a profit out of that investment.
Then, along comes me. Shares can only be sold if there is a buyer. I buy the shares. I now own a piece of Ferrexpo. The company has gone up in value twenty percent since I bought it a month ago. I did not work towards that in any way. But, I did contribute because if I had not bought those shares, the original shareholder could not have sold. I effectively bought all the contribution that original shareholder made, as well as all the risk. I now own a stake in that company and its future. I will sell those shares when I feel I cannot gain any more value from them, but isn't that my right? I can only sell if someone else wants to buy and take on the potential opportunity and associated risk.
To me, this is about seeing an opportunity and taking advantage of it. I have speculated in the past, and don't commit myself to never speculating in the future but I do intend to gain experience and knowledge and become better at seeing opportunities and avoiding danger.
What I have just written has very much been influenced by this debate. There was a time when I was a child when I understood the stock market to be about investing to get dividends and while that still happens, it seems to do so much less as many companies return value to their shareholders by increasing the value of the company and hopefully as a result, the value of the shares.
I am very open to suggestions for how to better invest my money. Is there another way I can get 20 percent return annually?
This week in books 5/26/17
3 days ago