Financial Markets For The Rest Of Us
An Easy Guide To Money, Bonds, Futures, Stocks, Options, And Mutual Funds
become. Unlike voting for government officials, where each person regardless of wealth can only vote once, the bigger shareholders of a company have bigger voting powers than the smaller ones.
As an example, let's see the chain of command for an employee of a large public company such as General Electric. He may report to a departmental supervisor, who reports to a section manager, who reports to a general manager, who reports to a vice president, who reports to the president, who reports to the CEO, who reports to the board of directors, who report to the shareholders, one of which may be our GE employee we started this example with!
Why Own Stocks?
The answer to this question for many is obvious: capital appreciation. In other words, using money to make money. But let us look further than just this simplistic answer to see what drives people to want to own shares in a company. This all goes back to basic human psychology and the drive to own.
As long as people have been people, one of the fundamental drives for many of them has been ownership. Couple that with basic human greed and the real human nature reveals itself. We like to own things and the more, the better. I don't intend to open up a deep discussion on human psychology and philosophy here. That is best left to the experts in those fields. Suffice it to say there are two factors that perpetually drive our lust for ownership: volume and rarity. The more of something we have and the more scarce an item we own, the happier we are. It's like saying, "Look at me. I have all of this and you have none." As you can guess, supply and demand play a big role in this game of ownership. …
Table of Contents