3 ms·
Basically, what VexXtreme said, but the operative word is the "might" in > the money used to buy a share has to go to the seller of the said share, who might i
by nhaehnle 12y ago
Basically, what VexXtreme said, but the operative word is the "might" in
> the money used to buy a share has to go to the seller of the said share, who might in turn use it to consume
It's really simple:
1. When you spend your money on consumption, there is a guarantee that the money is used for real world economic activity.
2. When you spend your money on building your business (the restaurant example in my comment), there is a guarantee that the money is used for real world economic activity.
3. When you put your money into an index fund, there is no guarantee that the money is used for real world economic activity.
It might be used in this way via indirect channels, but there is no guarantee - after all, the money might just remain stationary in a bank account, of which there are many - and so the positive economic effect is most likely less than in the first two cases. (Again, the positive effect for me as an individual who saves is obvious; I'm talking about the effect on economic activity.)