4 ms·
>I wish investing was more like selling small corporate loans. I'll give Amazon $50 today if they pay me $100 in 10 years. Sounds great to me, take my money, do
by taurath 8y ago
>I wish investing was more like selling small corporate loans. I'll give Amazon $50 today if they pay me $100 in 10 years. Sounds great to me, take my money, do something with it, and pay me back.
That’s a bond. Corporations do issue bonds but it’s just one way to invest, and generally you’re just betting they’ll pay their debt to you (and you’ll tend to get less over time but it’s more guaranteed). With a stock you’re betting that the value of the company will increase over time and you get paid as it increases in size and income.
- eldavido 8y agoThis is basically Warren Buffett's conception of a stock: a bond with a variable interest rate. It gets easier when you think of a share as a fractional claim on a cashflow (profits - what's "left over"). Bondholders are generally promised a specific amount upfront. Stockholders get what's left over -- the amount of that is anyone's guess. It gets pretty abstracted when you start talking about firms that don't pay out profits but the basic idea is sound.