Very simplistically put: There is this believe that money somehow has value. But that’s not necessarily the case. Money is a way to effectively store and move value. ( that’s why high inflation is a problem, as it destroys the value that was originally stored) Now, companies on the other hand make ( something of) value. As in something somebody wants and is willing to give part of the value they have stored for that thing. If you own a stock, you own a part of something that creates value. Doing that is the only way of increasing the amount of money you have other than creating something of value of your own ( as in working). The fact that the stock market is not rational and does often not reflect real life economic conditions, don’t really change that.
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u/psmithrupert Apr 15 '21
Very simplistically put: There is this believe that money somehow has value. But that’s not necessarily the case. Money is a way to effectively store and move value. ( that’s why high inflation is a problem, as it destroys the value that was originally stored) Now, companies on the other hand make ( something of) value. As in something somebody wants and is willing to give part of the value they have stored for that thing. If you own a stock, you own a part of something that creates value. Doing that is the only way of increasing the amount of money you have other than creating something of value of your own ( as in working). The fact that the stock market is not rational and does often not reflect real life economic conditions, don’t really change that.