And if I’m wrong and everyone is actually doing it, how is it sustainable in the long run? I mean, we can’t all be millionaires.

  • AnyOldName3
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    142 days ago

    Something I’ve not seen mentioned here yet is that one of the reasons it’s such an effective way to make money is specifically because loads of people are buying into it. When you buy a stock (or a derivative like an S&P 500 index tracking fund), it increases its price. If you’re just one person with a normal-person amount of money, it won’t be enough to register, but if you’re part of a group of millions of people, or an investor with billions at your disposal, it’ll make a visible difference, and if people see that happening consistently, they’ll want to join in and there’ll be a positive feedback loop. It only stops when there’s a big enough panic that lots of investors can no longer afford to maintain their investment and have to sell at the same time, and then you can even get a positive feedback loop in the other direction when people see the price plummeting and decide they need to sell before it plummets any further.

    Stocks are supposed to represent the value of a company’s current assets and expected future profits, but this kind of feedback loop muddies the water. With something like Bitcoin, which intentionally has no inherent value, because enough people have agreed to pretend otherwise, it’s gained effective value, and can be exchanged for money, or in some cases, goods and services. That’ll remain the case until everyone agrees that they don’t want Bitcoin, so could go on forever.

    • @vin
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      21 day ago

      There a many traders acting as price finding mechanism for individual stocks. The situation you described is not so as evidenced by companies getting added to and removed from various indexes