The $100 is part of Person B's account now from selling. The $5 goes to Person A's account from dividends.
Initial wealth of everyone in the stock market: $100
Final wealth of everyone in the stock market: $105
So where is the zero sum?
Trading & the Zero Sum Game Debate
- Thread starter butterfacetrader
- Start date
The $100 is part of Person B's account now from selling. The $5 goes to Person A's account from dividends.
Initial wealth of everyone in the stock market: $100
Final wealth of everyone in the stock market: $105
So where is the zero sum?
You don't understand dividends man. The stock price DROPS at dividend time based on tbe dividend payout. If you sample the worth of both A and B at the same time they're both at 100$.
You guys are so hung up on the stock price. The stock price is irrelevant pre or post dividend time! What we can be certain from a monetary perspective is that the money supply (and net wealth) for participants in the stock market will increase via dividends even if stock transactions take place or not. Stocks can be worth pennies and the underlying companies can still pay handsome dividends. So it is impossible for the stock market to be a zero sum game because the stock holders are part owners and share gains from economic growth. This is the basis of capitalism and if you believe capitalism is a zero sum game as well, you're probably a socialist and shouldn't be playing the stock market.
Now if stocks don't pay dividends, that's a different story.
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I'm not moving the goalpost. People are arguing about zero sum at the point of transaction, but that is a fallacious argument against the stock market because DIVIDENDS WILL BE PAID REGARDLESS OF TRANSACTIONS AND WEALTH GROWS.
Are you understanding that dividends come "out" of the stock and not from the magical dividend fairy? The Dividend "is" a transaction. It comes out of the retained earnings account of the given company and it reduces the market cap by the same amount. It's moving money from your left hand to your right hand. Nobody is getting richer by getting a dividend.
He's basically arguing the present moment with the future potential. I stopped trying.
This magical dividend fairy has the tricked a good part of the investing public. I can't tell you how many people say this stock is paying a 1.00 dividend !!! It's great !!!! They don't realize that the stock price is adjusted down to reflect that 1.00 when it's near time to pay out the dividend. That 1.00 comes out of your stock price.
With respect, you are completely incorrect. I would suggest you go research dividends and ex-dividend dates.
After research, if you are still sure we are all wrong here, then here is a suggested strategy for you. Buy the stock on the day a dividend will be declared 2 minutes before the close (to be sure you get filled). The next day sell it on market open. Your profit (according to your math) should be 5 dollars or close to it for each 100 dollars. If the stock pays 5 dollars 4 times a year, you will make 20 dollars pretty much risk free on a 100 dollar 24 hour investment. That will beat most investors. In 5 years plow the 100 dollars into another 100 cash machine. You will be rich beyond your wildest dreams in no time.
Good luck to you.