What is investing? It is the act of committing to an investment, definition of which according to Merriam-Webster is:
I think usually most people consider buying shares from stock exchange as investing. However, this is called buying from the secondary market - meaning, usually you're buying from someone else who has bought the stocks earlier than you did.
The primary market for stocks is when the company actually issues them and someone makes a deposit of money to their bank account, thus the investor has invested in the company. Investor takes the risk of giving his money to the managers of the company and hopes to get it back later on. The company receives an investment and issues shares for the investor - everyone is happy.
I consider the investor who is in the primary market an investor. He later sells the stocks he bought in the secondary market someone, but the person buying them in the secondary market is no longer what I call an investor. Investing is the act of buying shares from the company that issued them and not from another person. When one buys shares from the exchange and pays for them to another "investor", the company that issued the shares gets nothing. Thus no investment has been made in to the actual company.
What has been made, however, is a speculative trade. It's frustrating to me that we think both, the participants of primary and secondary market, buyers as investors, when only one of them has made an actual investment and the other a speculation.
This is what I think - it's my opinion that when one buys shares from the exchange, he is not an investor but actually a speculator. Someone said opinions are like buttholes - everybody has one, and they all stink. This one is mine - what do you think about it?
Legal Definition of investment(22.5.2017, https://www.merriam-webster.com/dictionary/investment)
1: the outlay of money usually for income or profit : capital outlay; also : the sum invested or the property purchased
2: the commitment of funds with a view to minimizing risk and safeguarding capital while earning a return — compare speculation
I think usually most people consider buying shares from stock exchange as investing. However, this is called buying from the secondary market - meaning, usually you're buying from someone else who has bought the stocks earlier than you did.
The primary market for stocks is when the company actually issues them and someone makes a deposit of money to their bank account, thus the investor has invested in the company. Investor takes the risk of giving his money to the managers of the company and hopes to get it back later on. The company receives an investment and issues shares for the investor - everyone is happy.
Definition of speculation: an act or instance of speculating: such asa : assumption of unusual business risk in hopes of obtaining commensurate gainb : a transaction involving such speculation(22.5.2017, https://www.merriam-webster.com/dictionary/speculation)
I consider the investor who is in the primary market an investor. He later sells the stocks he bought in the secondary market someone, but the person buying them in the secondary market is no longer what I call an investor. Investing is the act of buying shares from the company that issued them and not from another person. When one buys shares from the exchange and pays for them to another "investor", the company that issued the shares gets nothing. Thus no investment has been made in to the actual company.
What has been made, however, is a speculative trade. It's frustrating to me that we think both, the participants of primary and secondary market, buyers as investors, when only one of them has made an actual investment and the other a speculation.
This is what I think - it's my opinion that when one buys shares from the exchange, he is not an investor but actually a speculator. Someone said opinions are like buttholes - everybody has one, and they all stink. This one is mine - what do you think about it?
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