Hi all, I have completed some research already but cannot find a really explanatory answer, so thought I would ask the expert net traders here.
My question is this:
When buying shares in a company, what exactly are you getting for your money? I know about -
1. opportunity to go to the annual meetings
3. capital growth
but let me summarise it like the following.....
1. Annual Meetings - not interested, I'm sure the bigwigs can run the company just fine without my input
2. Dividends - appantly you only get a few% return via dividends, I'm sure this changes depending on the share, but thats what I've found so far.
3. Capital Growth - this is the reason I am so confused.....
It appears that the current share prices do not reflect the value of a company. There are many companies out there that are reporting huge profits, but their share prices are plumetting. I understand there are incentives for the companies to keep their share prices high (I imagine because the big wigs have shares themselves) but I also imagine that the share price has little impact on the day to day operations of a company and do not affect the companies bottom line (profit). So why would a company care if their share price drops, they already have their money from the shares from the initial float, and are making money through their normal operations.
The company is growing, but the share price (my slice of capital growth) is going backwards. How can I access some of the profit my company is making?
I read an analogy about buying a new car. when you buy the new car, your cash goes to the manufacturer, similar to how they make their money from the initial float, and after that, the car can be traded, much like shares. However the problem with this analogy is that if buying a second hand car, at least I have something real, something I can use. If I buy a share, and the share price is bugger all, and doesn't look like it will go up, dividends are less than the return I can get from a bank, what is the point?
Why would someone want to buy shares??
What makes people start buying shares and making the share price rise again???
What will drive people (buyers/the company) to want to lift the share prices back up to reflect company value????
What else besides people buying shares can lift the price?????
I know I've probably touched on several issues here, but if someone could give some easy to understand answers that will give me a warm fuzzy feeling about the share market, that would be great.