Delete comment from: Captain Capitalism
The problem with your zero percent capital gains is that it does not take into account the growth of the company. Assuming a company is making money, it will typically pay some money out in dividends and reinvest some money to expand the business. If Ford is not diluting his share holders equity by issuing new shares, and he takes some of his reinvested profits and builds a new factory, the asset value per share increases, and the shares become worth more.
Not all companies are like this. I have shares in a mining company that is drilling holes looking for diamonds. They will likely spend all my money before they find anything and the shares will be worthless. If however, the discover something I could be a rich man. The asset value per share either increases massively, or it evaporates. People are gambling on the outcome, and there is not really very much rational about it. - minuteman
Jun 15, 2012, 4:57:54 AM