Why do people put money in the stock market?

[bluestateguy]

Forgive me for the dumb question, but it seems rather risky to me. Nothing beats a good old-fashioned regular bank account, or even having money in a safe at home.

[Speck Tater]

1. Money for nothin' and your chicks for free. -- Ancient Chinese Saying. NT

[fascisthunter]

34. you nailed it

[Warpy]

2. Old fashioned investors like my dad was and I have turned out to be

put their money into equities that pay dividends rather than expecting those equities to increase in value ahead of inflation and make them rich.

I am now living on the dividends of the equities my dad purchased over his lifetime.

It's a way to have your money work for you so that you can have a decent retirement.

That's why people do it.

[EmeraldCityGrl]

6. Do you know what the rate of return is on the average dollar invested?

Always thought it was insignificant...guess not.

[Warpy]

9. You just have to invest enough dollars.

My lifestyle wouldn't impress any of the yuppies on HGTV, but I have no debt and I manage just fine. I'd be in fat city if I had health insurance, but I was declared uninsurable almost 21 years ago.

People with adequate wages can sock enough away to live decently when dividend income is combined with social security. Of course, adequate wages have been a cruel dream since liberals went out of power in 1969.

[DangerDave921]

14. out of power in '69?

The Dems controlled both houses till 1994. Or am I mistaken?

[Warpy]

20. You're making the mistake

of assuming all Democrats are liberals. They're not. There are liberal and conservative branches within the party and the conservatives have been in control since 1969.

[fla nocount]

42. What Warpy said.

Camelot was sacked, pillaged and burnt to the ground decades ago. Robt. Byrd is a liberal in today's climate. Hey, he voted against FISA.

[daggahead]

3. Because they want to join the ...

[lynettebro440]

38. LOL

so true, so very true....

[JVS]

4. Safer methods of investment don't provide the return necessary to support retirement.

Where do you put your money? What are your retirement plans?

[Uben]

5. Hmmmm, maybe because...

....banks don't pay shit! The market, historically, is a much better investment.

Put $100 in the bank and a $100 in stocks. Check them in ten years. See which one does better. I can think of no time in the history of the stock market that a bank account has out-performed the market in a ten year period!

[Boojatta]

21. "I can think of no time in the history of the stock market..."

Think of the period after the crash of 1929 when stocks continued to decline and when the real value of a dollar was increasing.

[Lance_Boyle]

23. pre-FDIC --> your bank deposits would've been worth precisely $0.

$100 in the bank before the crash and $100 in the market before the crash would've been worth equal values of zero shortly after.

[Boojatta]

25. Are you alleging that all bank deposits were lost after the crash of 1929?

Alternatively, do you wish to revise your earlier statement and mention not only the stock market, but also the FDIC?

[lelgt60]

29. If you have money left over after expenses, you are investing it no matter what you think...

All you are doing is choosing how:

1) Give it to charity. Invest in other people's survival; make yourself happy. Get a tax deduction.
2) "Invest" it in the mattress/safe at home. My guess is you will certainly lose 5% per year in purchasing power. Probably more like 7% per year over the next 5 years.
3) Put it in the bank savings account. Same as 2) except slightly less loss.
4) Invest it in your own education (not necessarily formal). They can't take your knowledge away from you.
5) Invest it in your own new business. Get all of the expected profit. High failure rate.
6) Buy part of somebody else's new business. Get some of the expected profit in return. Very high failure rate.
7) Buy part of somebody else's already going business. I suggest you research the business to make sure it's legit, doesn't do something you think is evil, etc. Get some of the expected profit, but a lot less than 6). If this is a "public" company, you're investing in the stock market. Long term make about 12%. But you could go 10-20 years with no profit. You could lose 80% over 3 years (NASDAQ from 2000 to 2003)
8) Learn how to choose what to invest in and when to sell. Far greater expected return than any of the others, but this may not be what you like to do and, if that's the case, certainly will not make you happy.

Bottom line:

Do what you love, be nice to others, have good luck and good genes, and everything will be fine...until you die.

[marmar]

7. Same reason they drop those dollar coins in slot machines.....

n/t

[brentspeak]

8. Companies got rid of pensions, and switched over to the 401K game

[KillCapitalism]

10. Because it's a "morally acceptable" form of gambling.

Too bad they have no better odds with that than they would with Vegas.

[DangerDave921]

16. Hey - you're wrong too

[Boojatta]

22. Are insurers gambling?

People buy insurance because they want to reduce their exposure to risks, but is there a moral hazard if gambling is immoral and the insurers who provide the insurance are gambling?

[Thothmes]

11. Same reason they play state lotteries or

venture to Vegas, Reno or Atlantic City.

[DangerDave921]

15. Not even close

Sorry but no.

[crispini]

12. because nothing has outperformed the stock market in the long run. Nothing

and if you stay in cash you are vulnerable to inflation.

Should someone near retirement be in the market? No. You should buy into the market when you're young and gradually move to safer positions as you age.

I'm not even opening my 401k statements. They're for 20 years out anyway.

[Doityourself]

13. Mine are for 15 years from now..but I've made some money in market..

enough to to sweat the small stuff in life, or the big things for that matter..lol

[pitohui]

27. someone "near to" retirement SHOULD be in the market

it depends on your life expectancy

on my dad's side, we're seeing life expectancies into the 90s, on my mom's side, into the 100s

even if i can put off retirement until age 70 (which is doubtful because i'm having a lot of trouble finding any work NOW) then i would still need to have some investment that outpaces inflation for another couple, three decades or risk seeing the money run out

most people can't buy into the market while they're young for the reason that they must pay for education, starting a home, starting a family, in the real world you start to invest seriously in your middle years and you have to continue at least some exposure in the market until pretty much...well...until you're at a stage of life where the doc can give you a firm opinion on how long you'll live

it sucks that the market is so volatile but since the alternative is a CERTAIN loss to inflation i see no real alternative

some chance is better than zero chance

[crispini]

30. "Some," yes, I'd agree with that.

But how much-- I guess that's what investment advisers are for. :P

[Snotcicles]

17. Now is the time to jump in IMO. There are some good companies going cheap. nt

[nadinbrzezinski]

18. Because if you do it with GOOD ADVICE

your rate of return will beat inflation and then some

That is why.

It requires discipline... and to know that it does go up and down, but overtime it will beat inflation AND your savings account.

By the by.. the interest in that savings account currently is under inflation... which means you are loosing money

regardless... if you are... SEE a good FA.

And you need to look at this in the LONG HAUL

That said... caveat... these are strange times

[Greyhound]

19. Because they were forced into it by the parasite class that controls it.

This injected the cash into the Ponzi scheme that was required to keep it going for another 20 years.

It will be interesting to see how they package the final larceny of the SS $$ in the next few years. The system is at the final stage of collapse and nobody is even hinting at replacing it so the only two options are;

let is collapse and start it over again, a truly dreadful option that will plunge the world into chaos for a generation or longer, or to inject the trillions of SS money to fuel it for another decade or two and leave it for those that will follow.

[lelgt60]

33. uh...other than being mislead, how were they "forced"

[Greyhound]

41. Allow pensions to be raided to undermine retirement security and replace them with

the "optional" 401(k) which are overwhelmingly invested in the stock market. Remember 1987?

[pitohui]

24. you might as well set your money on fire as put it in a safe at home

the safe at home is OK for a near term emergency but some people plan to get old one day and they will need money in retirement

let's say i'm 30 and i finally have the ability to start saving $2K a year every year for the next 40 years -- by putting in the safe i have only $80K which because of inflation over time will be worth about what $40K is today

in other words i will work an entire lifetime and only have enough money to be able to retire for ONE year before i have to buy a gun and shoot myself in the head

putting money in an interest bearing account is not much better because after taxes the return is still less than the rate of inflation

in other words, if you expect to live a long time and outlive your ability to work then you have no option but to look for investments that at least have the chance of returning some small profit after taxes plus inflation

this pretty much leaves the stock market or real estate

also your money in the safe at home -- if it's destroyed, look at your homeowner's insurance, you are likely only insured for $200 worth of cash, i'm not kidding, read it and weep -- considering the fire, flood, and criminal violence we've experience in 21st c. america you simply can't keep a big "wad" at home -- sooner or later you'll be relieved of it either by armed home invaders (a growing problem here) or simply by fate

[azmouse]

26. Most of the time it's a good thing.

Right now... well...

[Boojatta]

28. Three questions for you:

1. Why do people use their savings to start new business ventures?

2. Why do people convert a business from being privately held to being listed on stock exchanges?

3. Why do people who bought shares in an initial public offering ever want to enter into a transaction to sell some or all of those shares and what motivates anyone to be the buyer in such a transaction?

[lelgt60]

31. People start new business for lots of reason...

I did because of 4 things:

1) I had a neat idea I thought would make other people's lives easier, and...
2) I wanted to see if I could do it, and
3) I wanted to be my own boss, and
4) I wanted to make a good living without having to worry about being fired.

As to the other two questions,

People go public for 2 reasons:

1) To raise money to fund new projects
2) To have a way to take money out of the business whenever they want, instantly, without selling all of it.

People sell their stocks for lots of reason. The fact that they got it through an IPO means little, IMHO. The buyer is buys because they think the business is going to grow and make the stock more valuable - again - nothing to do with the IPO.

[Boojatta]

32. Okay, those are good answers.

Now I want to hear answers from the DUer who started this thread: bluestateguy.

[DailyGrind51]

35. They fall for the argument, "If you leave your money in the bank, you lose on inflation!"

But, at least your preserve your principle + a little appreciation, and it's FDIC insured!

[dorkulon]

36. Why do people bet on horses?

It's called gambling. It's fun when you win.

[hack89]

37. When done intelligently you can get a decent return on your money. nt

[Irish Girl]

39. In a dishonest money system, inflation has to be beat

If you don't invest in anything and instead stick all your money underneath your mattress, the purchasing power will be diminished.

I don't trust the stock market (unless you REALLY know what you're doing and let's face it, how many Americans do?) because it's just too easily manipulated by the extremely wealthy. To illustrate:

- Stockbrokers can recommend certain stocks to their clients and drive a particular stock price higher through public demand.
- Then when the stock is sufficiently inflated, the 'big money' will suddenly pull out of the stock and allow the unsuspecting general public to absorb the losses. The big money can also profit both on the way up and the way down

- By dumping the stock at the highest premium price, while at the same time selling it short and / or purchasing 'put' options (betting the stock will decrease in value)
- After stock takes a dive, they'll just repurchase the same stock at a tremendous discount.

This is how wealth can be easily transferred from the working class into the hands of the 'big money' wealthy. The stock market is very much like Vegas and as the saying goes, "The house always wins". I don't believe anyone should be invested in the market unless they're prepared to pick and choose their investments wisely.

[backwoodsbob]

40. over time

because of inflation your money stuffed in the mattress becomes worth less and less.

Here's an example...in 1970 you could buy a decent car for 4000...if you instead stuck that money in your matress..that same 4000 couldn't buy you a decent used 5 year old car.

The trick is to find a way to beat inflation with your savings

[mnhtnbb]

43. It's called investment. All investments carry risk. The market cycles.

It goes up, it goes down, but over time, it provides better return than a bank account and
beats inflation.

The market is not for the faint of heart. To spread the risk during down times, one maintains
a balanced portfolio. Buy low, sell high. Dollar cost averaging helps to buy more shares
when the market is down. Reinvesting dividends adds to total return.

Go to the library and get some books on investing. We're probably seeing one of the best
buying opportunities in a lifetime.

[Poseidan]

44. no shit

Just a few months ago, everyone bitched at me for keeping my money in an envelope. They told me, "Put your money in the bank.", but I said "No.". These days, they no longer suggest I put my money in a bank.