why is the stock market so important?

[AllaN01Bear]

[Walleye]

1. Important to me because I put my retirement money in an investment account

At the time interest rate was zero there was no point in putting the money in the bank

[MichMan]

2. Because millions & millions of ordinary people have their retirement savings invested in it ?

Not just the rich

[onenote]

3. Because more than 140 million americans own stock?

While the percentage of Americans owning stock has declined, it is still over half of all adults.

[Faux pas]

4. ...

Too me it's a scam. But that's just me.

[True Dough]

5. Well, you're not wrong in regards to many penny stocks

But there are a lot of blue chip stocks that have made many people a lot of money over decades.

[Faux pas]

18. It's

all about greed. Greed is the most deadly "sin" IMHO

[Disaffected]

22. Not all at all.

For most folks it's about want ing to make a decent return on one's savings, especially in years past when interest rates were very low.

It's also not necessarily a a scam if one is halfways smart about it i.e. stay away from speculative stocks and stock promoters. Instead buy good quality dividend paying stocks from large companies, hold on and you will almost certainly do much better in the long term than many other investments. If you wish to avoid "investment advisor" fees (as you should IMO) but are unsure about buying individual stocks, open a self-directed brokerage account and buy exchange traded or major index funds such as for the Dow Jones or NASDAQ thus avoiding the high management fees charged by "full service" (investment advisor) stock brokers.

[True Dough]

34. Greed

is what many corporations have exhibited by cutting workers' wages and benefits over several decades. Some of that profit is turned over to CEOs, the epitome of greed. Some of the remainder is made available to shareholders. So there's no "sin" in getting the money we're rightfully owed by purchasing shares. And it helps put us in a position to afford retirement.

It's not an ideal system -- far from it -- but it's what we have.

[brooklynite]

6. How is it "a scam"?

Companies use the market to raise capital for development and expansion.

Do you imagine that the computer/smartphone you're posting on would have been developed without the company raising funds for the project?

[Scrivener7]

9. But it would be silly to ignore the fact that electronic trading has created a

completely uneven playing field where the small investor at an extreme disadvantage compared to the big players.

For example, I can't afford to do high frequency trading, so those who can afford it can always front run ahead of me and every other small investor.

And those large players are the ones who have the access to the microphones where they can insist they hold no intrinsic advantage over the rest of us.

So, yeah, it's quite scammy, but it's what is available.

[FreeJoe]

23. Small trader, yes; small investor, not really

If you're trying to make money trading stocks, particularly with quick trades, arbitrage, and similar stuff, you are absolutely right. A small investor is at an almost insurmountable disadvantage to people that can front run their trades and trade much more quickly.

On the other hand, if you are talking about longer term investors, there isn't much of a difference. If your plan is to buy broad based index funds and hold them for years, which is what most investors should be doing, I don't see how you are at a material disadvantage.

[brooklynite]

25. I DON'T do "high frequency trading" and our returns have been excellent

The purpose of investing shouldn't, in my opinion, be to rack up as much money as possible as quickly as possible. We invest for the long term, methodically investing in a broad set of investment categories and leaving the investments in place until needed. Everything is in mutual funds with one exception. No reason a small investor can't do the same.

[Scrivener7]

28. Yeah, I do fine too. But the stock market is not what it purports to be.

It is not companies attracting investors because of their quality or profitability. It is not the best companies attracting the most investors.

It is companies attracting investors because they attract investors. And the high frequency traders and hedge funds have a lot to say about which companies attract those investors, and they have made sure they get the first bite of the apple.

At its base, therefore, it is high stakes gambling. Your and my sensible investments are only sensible because they are allowed to be by those who hold the reins.

[brooklynite]

29. "only sensible because they are allowed to be by those who hold the reins. "

Again, disagree.

Maybe you're thinking of particular companies like GameStop and Tesla where some people choose to invest emotionally. I would argue that there are plenty of low profile companies that "they" aren't holding the reins of, which present responsible investing opportunities and low purchase fees.

nb: Nobody "allowed" me to see the long term potential of Apple Computer 20 years ago and to purchase shares at a current effective price (after stock splits) of 65c...

[Scrivener7]

33. Game Stop was fun because it reversed the process, revealed it in all its

glory, and caught the guys who usually do it to the rest of us.

Oh, and here:
https://www.democraticunderground.com/100217565505

The stock market has become an instrument used by the wealthiest to become wealthier. The rest of us are just along for the ride.

And that's nice for you about Apple. But that was 20 years ago. The game has changed. How many quarters has Amazon been profitable in the last 20 years? But it's in a lot of those mutual funds you and I choose from. And as I said, high frequency trading, now accounting for a high percentage of daily trades, has changed the game especially since about 2009 or 2010.

[LT Barclay]

13. I'm not an economist but I think it would be better if

It was a bond market requiring them to be held for a certain amount of time rather than allowing the trading that inflates bad companies and destroys good ones at times.

[CountAllVotes]

10. Agree

These "wealth management advisors" make a bundle off of your money.

Every hand that it passes through YOUR money keeps a chunk of it. Its no secret when you see all of the "fees" they charge!

Scam indeed!

[Faux pas]

17. Thank you!

[brooklynite]

26. Who's requiring you to use a "wealth management advisor"?

[True Dough]

35. I've been a self-directed investor for more than 15 years

No front or rear loaded fees coming from my pocket.

[CountAllVotes]

38. I had an IRA that was in the stock market for a few years

It made a lot of money for awhile. But, all of a sudden there was a crash coming.

I called the company up that was holding it and had it transferred to a CD paying 5.75%.

When the broker found out, boy was she ever pissed as she had lost a huge portion in that crash (this was around 2001) never to recover. She is now in her 70's and still working as a broker. You'd think if she was so smart she wouldn't be working any longer would she? lol!

The idea of losing money that I worked for with no guarantees on it was something that never appealed to me. My great grandfather was a the Deputy Treasurer for a well-known city in Calif. when the market exploded. He had died in May of 1929 and I suppose my grandfather who was a teamster had no idea what to do.

My Dad's family ended up with NO HOME and living in a shack. I heard the story about the crash of 1929 growing up. After my uncle died, stock certificates were found with his things and they were all of no value at all.

I never knew about those stock certificates until much later in my life. I'll tell you one thing, my father wouldn't go anywhere near Wall Street. I can see why, can't you?

I don't have much to live on any longer as I fell ill in the late 1990s and I am disabled. That said, I do not rely on government programs for assistance. I've managed on my own since I left home at the age of 17 and I worked full-time for many years and went to college at night and on the weekends.

I was self-directed from Day #1. There were no options for me, that was made very clear to me early on. No one was going to help me get through school so I worked and worked and worked until MS got me good.

I don't have much now as I'm getting old and the storms and earthquakes have done thousands of dollars of damage to where I live. I will recover however, yes I will.

Glad I'm not the only one that sees these brokers (they could not even spell my surname properly on their mail and on the investment itself). They call all 'eff right off! I seriously dislike these people. They are licensed crooks IMO.

[Wounded Bear]

7. Like it or not, it is how we finance most of our largest corporations...

and like it or not, they're the ones who do the big stuff we need done.

[Faux pas]

16. YES!

My thoughts exactly

[DBoon]

8. because it determines the value of capital

and capital hires labor to make more capital

[NutmegYankee]

11. We are a market economy.

The market drives hiring of labor, and prices overall. In addition, millions of Americans are invested for retirement savings.

[Model35mech]

14. Well, kinda, IMO, we are a post-industrial Financials Market Economy.

If you aren't shifting sources and strategies to keep up the flow, you're not going to have a turbine being spun by that force, and you're gonna struggle to turn work effort into the equity needed to survive after your enforced retirement by mother nature.

[Elessar Zappa]

12. It's necessary

so that companies can raise money but there’s a lot of practices that traders engage in that should be against the law.

[ProfessorGAC]

15. This!

Too easy to manipulate prices and that should be better regulated.
The commodity markets are much worse.

[Model35mech]

19. I'm not sure the ratio of re-sale stocks to primary offerings supports that

It's true that stocks can still function as a mechanism for raising start up money, but I strongly suspect that is a rather small proportion of the volume of stock market trading.

[mathematic]

20. Imagine if you had to go to a farm to buy carrots.

Well, companies are you, investors are the farm, and "the" stock market (reality: stock marketS) is the grocery store.

If somebody came on DU and said "Why is the grocery store so important?" they'd be insta-banned as a troll.

[tinrobot]

21. Because, like millions of others, I work for a company that is listed on the stock exchange.

It's a good job and I really like it. If nobody bought my company's stock, I'd be unemployed.

Like them or not, corporations do provide jobs, products, and services that we all need to survive. And, yes, there's plenty that can be done in terms of regulation to make corporations act better and pay their fair share.

[usonian]

24. So that gamblers can play legally and not have to work for a living and add value to society.

[brooklynite]

27. I don't gamble, and I worked for a living for 36 years and I invest in the market.

[onenote]

30. I work for a living thank you very much

over 145 million adults are stock holders. But your nonsense is revealing.

[WarGamer]

32. I'll go a step further.

Even if you own ZERO stocks but live in California, let's say...

If the market is way down that year, the State can't properly fund CLSTR/CLPRS without raiding the State budget.

And that might result in lower State benefits elsewhere, increased taxes/fees.

[WarGamer]

31. Many good answers below.

Just to add.

Most if not ALL States RELY on the Stock Market to earn money to fund Gov't Pension plans.

California, for example... when the market is down, the State is responsible to make up the shortfall and this can run into the BILLIONS.

Same with pensions from Private sources...

Having said that... the US Gov't has FAILED at taxing and slicing a piece of the market as tax.

Lots of options. There could be a % transactional fee... Meaning if you buy $10,000 worth of MSFT stock, you pay $100 in tax, maybe for the cost of the nation supporting and standing beside the market?

[True Dough]

36. You could keep your money under your mattress

Or...

Value of $10,000 invested 12 years ago:

Gold = $11,800

S&P 500 = $35,400

Google = $58,000

Microsoft = $85,000

Apple = $109,000

Netflix = $122,000

Nvidia = $286,000

Tesla = $720,000

Bitcoin: $653,000,000

[Lancero]

37. Because it's the best indicator of the condition of billionaires assets.

Which is the only group of people this nation has cared about for decades.

When it's high, the wealthy get wealthier. And everyone else gets screwed by inflation.

When it's low, the wealthy start snapping up more investment properties and buying that cheap cheap stock. And everyone else loses their job.

[onenote]

39. 145 million American adults are invested in the stock market. They're not all billionaires.

I'm certainly not a billionaire, but I've gotten a much better return on my savings by investing them in the stock market than would have been the case had it put the money in the bank and kept it there.

In the 2020-2022 period, it was hard to find an interest rate that was above .1% (not 1%, but .1%). During that period, the stock market grew significantly, providing returns in the form on dividends as well as increased value of shares.

[Lancero]

40. And what percentage, pray tell, do these millions of Americans control?

11%. The other 89%, right to the billionaires.

https://www.fool.com/research/how-many-americans-own-stock/

Another fun number to pay attention to? Stock ownership by race. 1% is held by the AA community.

If you're rich, or white, the stock market is great. Everyone else gets shafted. Especially if you're not rich when the market correction, the inevitable response to the rapid inflation the stock market has experienced throughout the pandemic, hits.

[onenote]

41. Yes, AA ownership of stock is less than white ownership. But a sizable % of AA families own stock

In 2019 the number of AA families owning stock was 34%. Yes, the amount they had invested was a lot smaller than white investors, but I'm not sure why those 34% (a number which is increasing) are investing if they're getting "shafted".

[kairos12]

42. Pension funds.