r/stocks
A different perspective on what stock "investing" actually is.
Argues stock investing is a negative-sum game where buyers overpay for claims while sellers offload risk, challenging the 'buy and hold' narrative.
- Stock purchases represent immediate realized cash outflow (-$1000) in exchange for uncertain future claims, not guaranteed wealth.
- Sellers are often sophisticated actors who value liquidity or see overvaluation more than they value potential compounding growth.
- Market efficiency implies that 'easy' exponential growth opportunities are already priced in, making retail entry points risky.
Most people see stock investing as the following process:
Companies give us the opportunity to buy into their growth. This opportunity for compounding and exponential growth is a cheat code for generational wealth. We're lucky that the market is offering us the chance to buy in and get ahead in life. Buying $1000 of stocks right now is a seed of ownership that will grow over time.
What stock investing actually is:
When you buy $1000 of stocks, your balance is actually negative. It’s -1000, not 1000. The number on your screen says those stocks are worth $1000, but you’re down $1000 of real, actualized money that you just paid to someone. That someone decided that that $1000 was more valuable than the stocks they just sold to you.
But how can this be? Everyone knows how compounding works. Everyone knows how inflation and money printing works. So why would anybody sell stocks to YOU? Are you special?
Isn’t cash drag, time in the market, miss the 10 best days, hold and never sell, known to everybody, including the smartest and richest economists, financiers and mathematicians on earth? Out of the trillions of capital they control, they just decided out of the benevolence of their conscience to sell YOU the opportunity of exponential growth and generational wealth, when they themselves are capable of managing, protecting and deploying those assets far better than you ever will be?
How could selling “compounding exponential growth assets” to you for unproductive and inflating fiat currency, which "cash drags" and has "opportunity cost", ever be the correct decision?
Your ownership of stocks is a claim on a stock whose value comes only from the market price of that stock. You do not own money, value, capital or wealth. You own a claim. When you own stock worth $1000 that you just paid $1000 for, the actual "money" you currently own is between a range of -1000 and 0.
When your stocks you bravely held through 2009 dropped 60% (can't miss those 10 best days! Hold hold hold!) took until 2016 to return to their 2009 levels, you DID experience "cash drag" and "opportunity cost".
Just remember to keep in mind, you are not special, nobody wants to make you rich, and for every transaction there's a buyer and a seller, and if that transaction is money for stock, somebody (who has access to information and expertise you do not have) values your inflating cash dragging time-out-of-the-market monopoly bucks more than that share of stock.
I started typing out this long reply of how bad and dumb this mindset is, but i realized it would have no impact on you or anyone that thinks like this.
Good luck out there buddy!
OP must’ve lost his shirt
I couldn't get passed your first few sentences, sorry. When you purchase something, you're not "down" or "negative" or "red" cash, which is how you explained it. You're simply trading one thing for another. It's possible the net cash value goes to zero, but not negative.
Yeah OP's post reads like some 15 year old who just asked AI about investing and based their entire economic worldview on the slop it spit out
What a dumb post, compounding assets compound because there is RISK. Cash is a zero-risk but also zero-earnings asset. Risk assets can go up or fall because the company did well or did poorly. Any single stock is risky and compounding isn't guaranteed, However a basket of stocks gives you compounding for less risk, because you're invested in both winners and losers, however the risk is not zero. "Compounding" literally comes from taking risk, because earnings in the future are not guranteed.
So when you buy or sell a stock, you exchange a zero-earning and zero-risk asset like cash for a risky but earnings piece of a company. Someone is always willing to sell you at some value because as valuations go up, the compounding rate goes down.
It's not that cash is the real asset and stock the fake one. Both are abstract claims supported by society's collective agreement and legal enforcement. Buying stock is an asset swap: liquid cash for the equity claim. The risk changes, but you are not automatically down $1000 just because you no longer hold it as cash.
Doesn't make sense. Stocks are a share of a business and reflect estimates of the business' value. The estimated value may change with perception over time. Nonetheless Businesses can grow and alter their value.
We're lucky that the market is offering us the chance to buy in and get ahead in life.
Thank u mama capitalism I am so blessed to nurse at the teat of ur bosom.
If you hold $1000 cash, you will soon go negative because of the effects of inflation. A dollar is worth a dollar because the government says so. But after a few decades that dollar could be worth twenty cents. The same could happen with a dollar's worth of stocks. The entire concept of money and worth is artificial.
But I know that in a post Sixties economy, a dollar cash will not be worth two dollars cash after ten years. Whereas a dollar in equities or commodities can possibly be worth that or more.
Ma'am, this is a Wendy's.
Yeah, so, the thing with cash is that it can be used as a currency, and to make purchases. Stocks can be bought and sold, and are usually used as an investment, and when somebody decides to sell stocks, this usually means they wanna have cash to then spend it on something. So yes, indeed, people sometimes value 1000 dollars worth of currency more than 1000 dollars worth of stocks.
Just wondering, about your idea that when you trade in $1000 worth of currency for stocks and now suddenly your balance sheet moved by over $2000 somehow:
Does this also apply to you buying dinner? Say, you spend $15 on McDonald's, and now you are holding a bag containing your burger, fries and nuggets? Do you now have -$15, because, uhm, the food is actually worth nothing, and also the 15 bucks need to be deducted twice?