If you see from this point of view, that a grocery store sells you potatoes for 2$ more than they bought it for, and you are the one in loss within this whole process, then yes. “Someone is always in loss while other wins.” But, here, you have to see that you are buying a pound of potatoes from the grocery store, rather than buying a big amount of those directly from the farm, which would surely be more difficult for you. Thus, from overall view, buying it paying 2$ more from the grocery store is a better deal for you.
- So, who do you think, had a loss within this transaction? The answer is “nobody”.
Now let’s come to the stock market. As we often hear, “When you become a serious trader, you need to learn that you win only at someone else’s expense.” Is this true that you are always in loss while other wins? Doesn’t Stock just involve buying and selling the security? Does it have to entail other parties?
Is it possible that someone can lose when you win? Of course, welcome to the world of competition! However, it is not wrong for you to be profitable while they are not, any more than it is for your favorite sports team to win today’s match.
The use of money represents an exchange of goods or services. Since you can exchange goods for services, it is extremely convenient, as you do not have to find farmers willing to give you food for washing their car if you are a car washer.
There are certainly some things you can do with money that are complex and confusing, but at the end of the day, money represents the value of goods, services, and other resources.
Back into it:
“A win for one person equates to a loss for another?”
Answer: That entirely depends on how the profit is earned.
You have created some wealth, for example, by refurbishing someone’s house, and he pays you for your skill. Now you have more money and the value of the house has increased, even though the owner has less money to pay for your work.
Nevertheless, there are certainly instances in which the value of the goods or services being exchanged is overstated and/or fraudulent, which in turn affects the profits and losses of different parties.
Market value on average increases over time. Therefore, the claim that the market is a zero-sum game, where you only succeed if others fail, is not sustainable. Few people would keep investing just to fail and submit to the winners.
As workers produce goods and services adding value to the economy, the value of the stock market also grows. And with the growth in economy, the company keeps on gaining even further higher-highs. Investors provide the money the company needs to produce so that it can grow, and as it grows, they just enjoy the company’s success.
Economic growth will continue as the population grows, as more workers and customers are born, and as more useful things are invented. So, it’s not like you are always in loss while other wins. In the long run, businesses that succeed can keep growing in value without anyone ever losing their money. It’s necessary to understand that the money you gain in the market does not come from the losses of other participants, but from company creating value for the market.
Money isn’t something that grows on trees. It must originate somewhere.
It originates from one of two sources. It either comes from the person who paid even more than you did for a stock or it may come from the millions of customers who were duped into buying costly products from the company.
If you consider even the second scenario i.e “customers buying unnecessarily costly products from the company” as a loss; we can safely conclude that if somebody has just won, s/he has won out of someone else. But again, it is difficult to consider a loss straight away, as explained in the first paragraph.