2 thoughts on “Random thought of the day: Debt

  1. Owning shares in companies isn’t debt unless you look at it cross-eyed. By the way, owning shares tends to return better than debt on average (assuming you pick stocks and/or funds decently), though with higher volatility. (My savings are almost entirely in stock mutual funds by Fidelity Investments).

  2. It’s not that cross-eyed, the rate of return just isn’t as clear up front. You loan money to a company, and in return they agree to pay you some of the profits of the company (in the form of dividends). The only reason a company would want to go public is if they were looking to raise money, and as the tradeoff for people giving them money, they agree to pay them back. It’s really just another form of debt.

    Now, the promise of a company to pay its investors has some worth in and of itself, and thus the stocks are bought and sold and have their own value. But that’s not really the basic premise behind the stock market.

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