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Messages - Jonny5

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Shares / Re: Share investing clockwork
« on: September 26, 2015, 11:32:33 am »
OK, thanks guys, you've made it so obvious that my initial question now sounds a bit silly. You can't stop people from trading things that they own with each other. But I also think I'm probably misrepresenting or over simplifying my friend's views. I should probably go ahead and ask him for a clearer description. Thanks again for the help.

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Shares / Re: Share investing clockwork
« on: September 26, 2015, 04:47:01 am »
Quote from: tmsf12 on September 25, 2015, 04:11:42 pm
http://www.psg.co.za//support/tutorials
http://www.investopedia.com/university/stocks

Hope this helps you to win your argument  :whistle:
Thanks guys. The psg resource (first tutorial) was really useful. It says:

"Once a company has sold its shares to the public in the primary market it derives no further direct benefit from the trading of its shares in the secondary market. It is, however, essential to have a healthy secondary market before the sale of shares in the primary market can be successful. After all people are usually unwilling to buy shares from a company unless they know that they could sell them again in the secondary market if they wanted to."

So a company will have its ipo, where the public can purchase the companies shares (primary market). Then from there, the public trades the companies shares between themselves in the secondary market.

I think my anti capitalist friend sees no reason why a secondary market should exist. Why? Because it seems to provide no social benefit (although, it does help me to build up retirement capital). The primary market does have a social benefit because it helps fund businesses which in the end leads to jobs and, with competition, innovation and the many other benefits that capitalism brings. But as the quote says, nobody would buy in the primary market if there was no secondary market to sell in. Maybe that's the missing piece of the puzzle.

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Shares / Share investing clockwork
« on: September 25, 2015, 05:35:48 am »
Hi guys, I don't know much about investing even though I've been dabbling in share investing over the last few years. I see share investing as a way to increase your capital and if done right with proper research, it can help you build up cash for a nice retirement. It's better than simply putting your money in the bank.

But recently I've been having a debate with an anti capitalist friend of mine who says that investing is not very different to two people simply making a bet, and that this resembles gambling.

My limited knowledge of how share investing works got me a little stuck and I was hoping someone could help to clear up my confusion.

The basic question is: when person A buys a share of say sasol from person B, how does that transaction benefit sasol (assume that the transaction leads to a higher price for sasol shares)? Does sasol want their share price to be higher? I believe that in many cases, directors would own shares in their own company and so there is a direct benefit for them if the share price goes up. But what about those companies whose directors don't own shares (does this ever even happen?).

My friend says that this is like gambling because it ends up being a case where person A believes the share price will go down, so he sells to someone who believes that it will go up. If this represents a model of how things work, then how does this benefit the wider economy?

Sorry if this is a really basic question. If someone could point me in the right direction, perhaps an online resource that they are aware of, it would be much appreciated.

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