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Americans expect all major public companies' growth to continue indefinitely because financial advisors have told generations of people that their life's saving

Americans expect all major public companies' growth to continue indefinitely because financial advisors have told generations of people that their life's savings is guaranteed to grow on a steady curve forever as long as it's in the stock market, and they leverage their wealth accordingly, because it's the "financially sound" thing to do. This is why any time a major public company can't continue increasing profits, it becomes a national crisis and the government has to step in to save them. I once remarked to an older family member (Boomer generation) that no investment is ever "guaranteed" to make money, and they corrected me immediately, appalled that I would even say such a thing. "Guaranteed" investments are the common sense of their generation. I invest prudently in funds that grow modestly but stably; of course my investments are going to keep growing. Why wouldn't they?

redial 9y ago
Why wouldn't they indeed. Isn't the point of a fund to have consistent "infinite" growth? Companies fail all the time, but the job of the fund manager is to anticipate or mitigate those losses with new companies/investments.
- deleted 9y ago
  [deleted]
skybrian 9y ago
Theoretically, in the steady state where revenue and profits are fixed, the stock price wouldn't go up but you could reinvest the dividends. Whether this is a good investment depends on the profit margin. In the real world, the average lifespan of a company in the S&P 500 is under 20 years. [1] [1] https://www.cnbc.com/2017/08/24/technology-killing-off-corporations-average-lifespan-of-company-under-20-years.html https://www.cnbc.com/2017/08/24/technology-killing-off-corpo...
- jonknee 9y ago
  You're reading that stat incorrectly: > "The average age of a company listed on the S&P 500 has fallen from almost 60 years old in the 1950s to less than 20 years currently," The reason for that is there have both been a lot of mergers and a lot of new companies that have gotten huge in a small amount of time, especially in tech (Google, Amazon, Facebook, Netflix, NVIDIA, etc).
hueving 9y ago
>This is why any time a major public company can't continue increasing profits, it becomes a national crisis and the government has to step in to save them. This is completely false. Where in the world did you get this idea?
- tboyd47 9y ago
  "Any time" is hyperbole, but the bank bailouts and car manufacturer bailouts were major lessons for me about how American society really works. I also hear this kind of sentiment a lot in the Net Neturality wars. "The cable companies can't make money off of TV anymore," therefore, the laws of society have to change.
  - hueving 9y ago
    So "any time" = one time then. The financial crisis is hardly a recurring event.

redial 9y ago

Why wouldn't they indeed. Isn't the point of a fund to have consistent "infinite" growth? Companies fail all the time, but the job of the fund manager is to anticipate or mitigate those losses with new companies/investments.

deleted 9y ago
[deleted]

skybrian 9y ago

Theoretically, in the steady state where revenue and profits are fixed, the stock price wouldn't go up but you could reinvest the dividends. Whether this is a good investment depends on the profit margin. In the real world, the average lifespan of a company in the S&P 500 is under 20 years. [1] [1] https://www.cnbc.com/2017/08/24/technology-killing-off-corporations-average-lifespan-of-company-under-20-years.html https://www.cnbc.com/2017/08/24/technology-killing-off-corpo...

jonknee 9y ago
You're reading that stat incorrectly: > "The average age of a company listed on the S&P 500 has fallen from almost 60 years old in the 1950s to less than 20 years currently," The reason for that is there have both been a lot of mergers and a lot of new companies that have gotten huge in a small amount of time, especially in tech (Google, Amazon, Facebook, Netflix, NVIDIA, etc).

hueving 9y ago

>This is why any time a major public company can't continue increasing profits, it becomes a national crisis and the government has to step in to save them. This is completely false. Where in the world did you get this idea?

tboyd47 9y ago
"Any time" is hyperbole, but the bank bailouts and car manufacturer bailouts were major lessons for me about how American society really works. I also hear this kind of sentiment a lot in the Net Neturality wars. "The cable companies can't make money off of TV anymore," therefore, the laws of society have to change.
- hueving 9y ago
  So "any time" = one time then. The financial crisis is hardly a recurring event.