ERD50
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
This may have been discussed before, I don't recall. I sometimes have trouble getting my head around the really big finance questions (like balance of trade, currency devaluation etc).
Many of us probably have half or more of our portfolio in equities. Sometimes you hear that "rich people" are 'hording' their money, and it would be better if it were spread out (and I don't mean for this to go into the topic of redistribution of wealth, that is just a statement). But is the money just siting there?
The answer I usually hear is, no - it is "invested" in companies that are providing products, services and jobs. It's working for us, and w/o that investment, those companies couldn't do what they do. But is it? I understand (or think I do), that the Initial Public Offering raises money for the company, but after that, what? Unless they sell off more of those shares, or make another public offering, supported by the current NAV (and doesn't that dilute the existing shares?), what good do my shares in my fund do for anyone (except me)?
And if the company pays dividends, it seems like they are paying off that initial offering essentially forever? It's like a low rate, infinite term, interest-only loan. How does NAV play into anything?
Am I missing something simple? Am I missing something complex?
-ERD50
Many of us probably have half or more of our portfolio in equities. Sometimes you hear that "rich people" are 'hording' their money, and it would be better if it were spread out (and I don't mean for this to go into the topic of redistribution of wealth, that is just a statement). But is the money just siting there?
The answer I usually hear is, no - it is "invested" in companies that are providing products, services and jobs. It's working for us, and w/o that investment, those companies couldn't do what they do. But is it? I understand (or think I do), that the Initial Public Offering raises money for the company, but after that, what? Unless they sell off more of those shares, or make another public offering, supported by the current NAV (and doesn't that dilute the existing shares?), what good do my shares in my fund do for anyone (except me)?
And if the company pays dividends, it seems like they are paying off that initial offering essentially forever? It's like a low rate, infinite term, interest-only loan. How does NAV play into anything?
Am I missing something simple? Am I missing something complex?
-ERD50