Investors need to consider investing in stocks productively

Reading Bob Gottliebsen’s article on investing in shares in Business Spectator should have got you thinking.

To an investor what does”Investing Productively” mean?

Bob picked up the theme of my talk based on a blog post on capitalunderdogs which was that investing by individuals today is predominantly driven by charts, numbers, spreadsheets and stock picking software but he went further and likened it to a casino.

“Investing Productively” can mean many things but in the context of an investors money being put to good use it means that the money an investor invests …

  • Creates jobs
  • Grows businesses
  • Fosters innovation
Investors invest or re-invest $1.3 trillion a year on shares listed on the Australian Stock Exchange (ASX) however only around $63 billion is invested productively (IPO’s and secondary raisings). Meaning investment that goes directly into an entity that uses the capital to …
  • Creates jobs
  • Grows businesses
  • Fosters innovation
At present this $63 Billion only represents 4.7% of all the funds invested. In the “good old days” if you wanted to say build the Princess Theatre in Melbourne you would raise the funds by issuing shares. The investors would be investing their money in a project that …
  • Creates jobs
  • Grows businesses
  • Fosters innovation
Today an investors funds are more likely to be passed to another investor who has chosen to sell out of a stock or share and invest in another.

 

If an investor invests in stocks or shares for a company raising investment via ASSOB, Wholesale Investor, AIN, Angels Networks and Private Equity and Venture Capital firms, 100 percent of the funds invested go into the entity raising capital.

 

While these organisations and affiliations continue to primarily reinforce the opportunity that shares and stocks were originally issued for this is not so for the majority of shares transacted through stock exchanges.As Bob said  “For the last century or so stock exchanges have conducted that capital raising function, but these days stock exchanges have been turned into massive casino-style trading houses where capital raising is less than 5 per cent of what they do.”

 

Stock exchanges need to re-evaluate their place in the business development value chain as with the way the Internet has changed the paradigms for industries that were “going to last forever” they may find the need for their services in the future being grouped and legislated within the category of gambling and speculation.

 

Stock exchanges evolved due to the inability to easily connect investors that wanted to buy or sell. Same with 78’s, LP’s, CD’s and DVD’s. People needed to physically visit an outlet to obtain there latest release. Not any more. Music aficionados can now buy direct from the artist.

 

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