The stock market is largely an "after-market" thing.

Yes, companies sell stock (ownership) to raise money, but once stock is sold it has little relationship with the company that issued it (except the executives want it to go higher because they've often been "rewarded" with stock).

So this after-market breaks into two regions - people holding stocks that reward stockholders with dividends (returning money to the "owners"), and people who buy and sell stocks on speculation.

Dividends are issued for stocks in stable (you hope) companies that are near worthless on the speculation market (too stable) - to keep the price up - in case the company needs to raise money by selling more, and for that "executive compensation" thing.

For persons holding stocks, especially small holders, the market is very important. It makes stocks into a "cash equivalent". The value of that "cash equivalent" is highly variable, but it is real. You can convert your holding into cash within just a couple of days.

Contrast this to the investment I inherited in an oil well. That investment cannot be valued and would be a lot harder to sell than a "time share condo". Yes, it pays some money every year, for an amount and duration that cannot be be predicted in any way.

It's also much better than investing in "collectibles" (of any type), which are far more subject to fluctuation than the stock market (besides, you probably got screwed really deeply when you bought those coins or "naturally colored diamonds" (I've had a couple calls on both those this week, as well as oil wells and precious metals)).

My favorite collectible story, though, is Beanie Babies. When the publisher (just last month convicted of massive tax evasion) announced he would be issuing no more, the market collapsed overnight. One lady who was brokering Beanie Babies got desperate calls from people with large collections. The best advice she could come up with was, "Pour them into your walls for insulation".

Yes, the stock market system is very much amenable to manipulation and fraud of every type you can think of (and some only the fraudsters can think of), but it's a lot better than not having the market.

Just like in our earlier hunter-gatherer society, you have to be very careful of the saber tooth tigers - they abound on Wall Street.

Collectibles markets are very much subject to public perception.

Beanie Babies went from dynamic with high publicity and anticipation of the next issue to static - no publicity and nobody cared. It did this practically overnight.

Art investments fluctuate radically depending on what period or artists are in style at the moment - always tempered by very skillful frauds.

Precious metals are a pump and dump scheme, currently entering into the downward spiral.

Wine investment is tanking from an unbelievable high due to rampant fraud, market manipulation, cost of storage and cost to authenticate what you have is actually real.

Stamps? Dying from lack of interest as stamp collectors die of old age.

Coins? Diamonds? Gemstones? You've been screwed so badly getting in it'll be two decades before you can get out for what you paid.

Why stocks? Well, that depends completely on the skillfulness of the selection, and timing. Generally, I let Inez do what she thinks is right, and she uses a rather conservative approach. The result is, all my holdings pay dividends - between 2.2% and 8.00%. Weighted average (weighted by how much money is invested) is probably around 5.7%, which I understand is better than most savings accounts pay right now.

Appreciation is on top of this. Every once in a while Inez calls and says, "This is pretty high right now, I think we should bail" I let her bail, because she's right most of the time (being right is her job). Of course, if she sells something high, I have to pay taxes on the gain, but in the words of a multi-billionaire many years ago (don't remember who), "Ill take every taxable dollar I can get".

If you are logical and very careful, return is proportional to risk. Lacking either or both of those virtues, you are screwed - the saber tooth tigers are everywhere.

. . from anything else in life? You place your bets - and the more carefully you place them, the more "lucky" you are likely to be.

Luck is the overriding factor in every aspect of life, from the family you are born into, to career success, to being killed by a falling tree branch.

But, as to the worthlessness of this stock "after-market" - if it did not exist, companies would be unable to raise any money to expand except by "private placement", a much more difficult and limited course, or by loans from bankers, and you know what nice folks they are.

Why would anyone buy stocks if there were no market through which to sell them when the need for cash arises?

Yes, of course you can go the "high risk" route, betting on stocks that are rising fast. Perhaps you will become very rich - or end up sleeping on a park bench. You can end up on that park bench investing in nothing too.

. . it's going to be a loooooooooong time to even break even if you can't recover your principal - and for that, you need an active market.

Well, you could pass the investment on to your descendants if you're into that, but what if you have a sudden need for cash? For that you need a market.

I get calls every week from guys trying to sell me shares in oil and gas well drilling. The returns can be pretty good, but I'll have nothing to do with them, because I know it's almost impossible to cash out.

I've also carefully read the terms for these, and other private placement investments (medical stuff, etc.). The company has all the rights, and the investor has practically no rights at all.

On the open market you buy and sell as you please - the company and it's terms aren't involved at all.

Liquidity is king.