As someone who invests in the stock-market, i totally disagree with your 'random' remarks...

 

Well of course you do. Almost everyone who invests does, or they wouldn't do it. I've been a busy investor my whole life, income permitting. But I don't kid myself that it's predictable or winnable, or that logical investing will necessarily pay off. Much recent economic theory has focused on the irrational behavior of mobs, and how that can be applied to investing, where the valuations put on stocks are far more about perceptions than reality.

Two years ago, everyone was positive that the best investment ever was bundling subprime mortgages, and fortunes were made on them. And now they're all collapsing and threatening to take down much of the US/world economy with them.

Investing isn't a zero sum game, like sports betting, since in times of good economy almost everyone can win, and most people do improve their stake over the long term (this is not globally true, but has been for the US since the 1940s). But individual companies, or industries, are not much short of random on the short and medium term. My dad perpetually rages about some stock he's got a lot of and how they had a great earnings report and how it went down 8 points since some analyst's Ouija board prediction was 1% higher than the actual earnings, thus sparking a selling panic. That's not exactly "random" but it's far from logical or reasonable or predictable, other than in an "unpredictably predictable" sort of way.

 

Still disagree with you. It is just too much of a generalisation to say that these things are random, when talking about the stock market.

Granted, there is a lot of volatility at the moment, due to the continuing global credit meltdown, however there are some fundamentals of investing in companies that are not random.

Share price will typically reflect the earnings per share of that company, with certain risk factors factored in. Who cares if the shares for A large company drop all the way down to 1 cent per share (eg from $100 p/s). If the company continues to earn money then the dividend payouts will remain at the same level.

The key to my argument here is the word 'risk' and understanding that risk based on company and market research. Would I have bought Bear Stearns stocks in a financial crisis? Hells no. I steer clear of all financial stocks at the moment, and all companies that have debt.

I think it is perhaps easy for you to bundle the idea of 'investing' into a large generalised comment, however there are too many variables for that to be justified in my opinion. I do not see the similarity with getting a sub-prime mortgage and buying a share(s) in a good company that has a strong market position (unless you used margin lending to get the share, then you're begging for trouble).

I'm not usually so bitey about this kind of thing, but I do believe you should get a better understanding of these things before you comment.

And if you think investing is 'random' then perhaps, as a generic example, you could have a look at what Warren Buffet has achieved, and why Berkshire Hathaway is what it is.