I've been learning about and investing and participating in the market for a few months now, but have not really been able to wrap my mind around an answer to the question in the title.
There have been some good explanations posted about how stock in a company represents ownership and the whole trading mechanisms built upon that. Based on my understanding and in very simple terms, companies can use profit either to pay dividends to stockholders, or expand the company. When most of the profits are dividends, the intrinsic value of the stock is very clear - the holder is receiving cash on a regular basis to do whatever they please with.
However, it seems that most companies choose to put profits to work overwhelmingly for expansion, for obvious reasons. Now, as a holder of this stock, the value it has to me is only what someone else is willing to pay me for it. As far as I can tell (beyond having enough stock is actually influence decisions), this is the only value of the stock to any shareholder. So what forces this value to exist, what if people just universally decided to stop buying a perfectly good stock? The company, especially if controlled by just 1 or a few parties, could choose to never pay dividends and then I'm holding a stock I can't make any money off. I realize the company itself continues to get larger and worth more over time, but as an investor, how is that worth actually tied to me in any concrete way?
Hope I got my question across clearly!
Submitted May 04, 2018 at 09:39PM by financewings https://ift.tt/2HNXmMp
