Quote:
Originally Posted by widebody911
Let's be honest - when it comes right down to it - isn't the Stock Market™ really just thinly-veiled institutionalized gambling? When you buy n shares of a stock, you're not really investing in the company; you're betting that eventually someone else will pay you more for those shares than you paid. It seems the only reason a company would have the incentive have their stock valued more highly is because the executives and the BOD possess a certain amount of stock, and so their personal fortunes are at stake.
Yeah, this seems cynical, but after you read enough about various scandals, automated/programmed trading and the other various shenanigans - legal or otherwise - it looks like it's all just a big game and it's not rigged in our favor.
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Ben Graham(my guru) wrote that the owner of equity stocks should regard them first and foremost as conferring part ownership of a business. With that perspective in mind, the stock owner should not be too concerned with erratic fluctuations in stock prices, since in the short term, the stock market behaves like a voting machine, but in the long term it acts like a weighing machine (i.e. its true value will in the long run be reflected in its stock price). Graham distinguished between the passive and the active investor. The passive investor, often referred to as a defensive investor, invests cautiously, looks for value stocks, and buys for the long term. The active investor, on the other hand, is one who has more time, interest, and possibly more specialized knowledge to seek out exceptional buys in the market.[5] Graham recommended that investors spend time and effort to analyze the financial state of companies. When a company is available on the market at a price which is at a discount to its intrinsic value, a "margin of safety" exists, which makes it suitable for investment.