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.
