I understand why someone might buy a stock from a company that pays out dividends. That makes sense.
But there's absolutely no inherent value whatsoever in a stock that does not pay out dividends. You make money with that stock only by selling it a higher price.
It's sold at a higher price only because there are more investors willing to buy it than sell it. But investors are eager to buy it only because the company has/or is expected to report good earnings and growth.
But if all the participants of the stock market were to agree to it, tomorrow we could decide to value companies based on how many of it's employees are expected to buy pets, or how many cars its CEO plans to buy, or how many of its factories will be colored red, ANY RIDICULOUS VARIABLE WHATOSOEVER, and the stock market would work exactly the same.
It just so happens that investors worldwide have decided to label companies with high earnings as the "valuable" ones. Isn't this amazing?
2007-05-10
04:23:12
·
5 answers
·
asked by
Anonymous
in
Personal Finance