Unless you already have a lot of money to invest, dividends aren't going to make a spit of difference, or any more difference than a CD or bank interest amount.
The "incentive" for buying stock is their average annual appreciation of 8% rather than 1% at a bank. Last year, the stock market was up 30%. That's the only incentive for investing in stocks. But if you're only investing for the 1% dividend or 3% dividend, why take the additional risk of stocks? You take on additional risk for additional potential return.
You make the statement, "Is stock an asset if nobody buys stock?" within a question showing confused logic. You make a presumption that there is or was or will be a time when "nobody buys stock." Show us that time when "nobody buys stock" and you might have a valid question.
Your net worth is calculated by subtracting your liabilities from your assets. Whether or not there are buyers for your assets does not change the definition of an "asset."
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No, you have no rights to any of the physical assets of the firm, so you cannot just go there and take an asset and sell it. If no one buys the stock you want to sell, basically you are stuck with it - in real life, what will happen is that the price of the stock will decline until someone does want to buy it -however, that price decline might be big enough where if you sold, you would lose money (in which case you have a decision to make).
And yes, if everyone figures out that the stock is "doomed" then you are basically screwed - think of the employees at Enron who had the company's stock in their retirement fund - they all lost a bundle of money.
Nobody ever said that making money in the stock market was guaranteed - in fact the first rule of investing is never invest money you cannot afford to lose.
When you buy shares of a company, you OWN a part of that company. Since in your theory, the company "is doing great and still growing", your asset is growing with it.
Let's look at stock from a company perspective. As a company, you need to raise capitol to make investments into the business. There are two ways. One is to borrow money from a bank. The other is to sell a percentage of your company to investors. If stock is available for the company, at some point the company decided to sell shares to investors. So, let's say our little company decided to sell shares. In our example, our hypothetical board of directors decides to offer 1,000,000 shares representing the full company. The company then keeps 300,000 shares for itself (based on prior investments). Then, sells the other 700,000 shares. This means that 70% of our hypothetical company will be owned by investors. The company invest the proceeds from the IPO into equipment or resources to grow the company. Since you said the company is doing well, we'll assume these are GOOD investments enabling much growth.
If the company shuts its doors one day (e.g. the leaders went to jail).... then the assets of the company belong to the share holders. An auction is held and the proceeds go first to debt holders (i.e. any outstanding loans), and then to the share holders. For those of us that invest in their stocks, this usually means getting paid pennies on the dollar (e.g. 5 cents for every dollar invested).
More typical is that the assets of the company are purchased by another company. If that other company is public, then your shares of stock are converted to the new company. If the company is private, then you are given a percentage of sale based on your ownership position (i.e. number of shares owned). For example, you may have purchased the stock for $1.00 a share. And, when the private company buys the other for 1.5 million dollars, you could now get $1.50 a share.
I'm grappling with the concept of (non-dividend) stock.
What I understand is, I buy (non-dividend) stock so when it appreciates I sell it to the next guy, and he buys stock so he can sell it to the next guy.
Say, for some reason, people stop buying stock (say a crazy religion takes over and prohibits it), and even though the company is doing great and still growing, nobody's willing to buy stock off me. Does the stock I own still mean anything? I thought stock technically means I own a % of the company, but can I go take a % of the company assets and sell them for cash? On paper I own % of this company, but what I only own is stock, right? If the company refuses to pay dividend, and for some reason nobody will bid for stock, the "%" of the company I own technically means nothing, am I correct? Please enlighten me on this, thanks.
A follow up question: Say I own stock in this promising company, but somehow everybody finds out the company is doomed the next day, so of course nobody bids for its stock anymore. Whom do I sell my shares to? What do I do with them? Can I transform them to any other type of asset?
