Comment by onebaddude | Hacker News Reader

Comment by onebaddude | Hacker News Reader

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>for the common man the effort necessary to make an extra 15% on your yearly income in the stock market, is more than if you did overtime or even went out and got a part time second job to earn that extra 15%

You're right. And why should it be any other way?

People often forget that underneath the glitz, glamour and dazzling array of numbers of the stock market and Wall Street, the purpose of "the game" is moving real capital to real businesses in need. And there are real risks associated with that.

The last 20 years have been seemingly "easy" for investors, or at least the years (prior to 2008) have been portrayed that way. But in no way should people believe he or she should be able to throw darts at the stock page and earn a 15% return. Aiming for the maintenance of the purchasing power of your savings, while generating those savings through work at which you're actually adept, is a far more reasonable and sensible goal.

> People often forget that underneath the glitz, glamour and dazzling array of numbers of the stock market and Wall Street, the purpose of "the game" is moving real capital to real businesses in need.

Well, if it is a public offer, yes. But most of the time people are just buying stuff on the secondary market, meaning that the ownership of the company changes (a bit), but there is no capital move to and from the company. Nevertheless, this might help companies to create and time new rounds of public offers.

The secondary market actually does serve a capital allocation function. It provides liquidity to the original shareholders, and to the people who bought from the original shareholders, and so on. This, in turn, encourages people to become original shareholders, and to provide capital to the company.

Illiquidity is one major reason that private companies sell for lower multiples than public companies of equivalent size.

Secondary market provides liquidity to the shareholders, but not to the company. There is no cash-flow to or from the company if you buy an AAPL or GOOG. As I've said: the cash comes to the company only if it decides to have another public offering.

I see where you are going with the "what motivates people to buy ownership" part, and it has truth in it. My grandparent response was to the part "moving real capital to real businesses in need". Many people don't realize that the secondary market is not moving capital to the business, only the public offering.

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