Can an investor who perpetually holds stocks lose money?

External question — Personal Finance Stack Exchange Author: Imeguras Original post: https://money.stackexchange.com/questions/141431 License: CC BY-SA 4.0 — https://creativecommons.org/licenses/by-sa/4.0/ Adaptation: HTML converted to plain text; contact email addresses removed. I'm a little confused about stocks, since I'm a crypto holder. Thus, I'm used to seeing value on ideas that have no inherent value. Therefore, I want to draw some hypothetical situation with some rules. Let's imagine I have 200 shares of stock from a company that I bought at $1/share. I'm intending to hold the stock for an infinite amount of time. The rules are The company never ceases to exist. The broker and exchange never ceases to exist , implying that I can hold the stocks for an infinite amount of time. The dividend is paid in a currency that never fluctuates, inflation isn't relevant for the question I never sell the stocks , buy more or trade them in any way and they are soul bound to my body. Given this scenario, can I lose money at any time from holding perpetually? I've read in another thread that companies pay dividends but is the opposite true? If the company requires more financial support to survive (even if they never go bankrupt), can they force investors to contribute money proportional to the shares they hold?

External answer — Personal Finance Stack Exchange Author: RonJohn Original post: https://money.stackexchange.com/a/141432 License: CC BY-SA 4.0 — https://creativecommons.org/licenses/by-sa/4.0/ Adaptation: HTML converted to plain text; contact email addresses removed. Lets imagine i have 200 stocks from a company Shares of stock; you own shares of stock. EDIT: shares of (common) stock are nothing more than fractional ownership in the corporation; nothing more. (I mentioned common stock because there are other forms of shares which don't give you voting rights. can I lose money at any time from holding perpetually? No, because you only lock in "paper" losses when you sell . They're called "paper" losses because you haven't actually lost any money yet if you're still holding shares. This is exactly the same as "paper" gains : Bill Gates and Jeff Bezos are multi-multi-multi-billionaires, but don't have billions of dollars in the bank . If the company requires more financial support to survive(even if they never go bankrupt) can they force investors to contribute money proportional to the shares they hold? No. They'll either borrow money or issue more stock ( after getting current owners -- aka you and other shareholders -- to vote on it), either directly and immediately, or some time in the past when the owners authorized the issuance of -- for example -- 2 million shares, but only 1 million were issued. That would dilute your ownership, possibly causing the share price to drop Also where do i see the dividend the company offers? In your bank or brokerage account. Back in the day, they might have mailed you a check. Dividends deposited into your brokerage account might -- if you have instructed them such -- be immediately used to purchase more shares of stock.

External answer — Personal Finance Stack Exchange Author: Aganju Original post: https://money.stackexchange.com/a/141434 License: CC BY-SA 4.0 — https://creativecommons.org/licenses/by-sa/4.0/ Adaptation: HTML converted to plain text; contact email addresses removed. Your theoretical situation can't lose money numerically, but you may lose value if you picked the wrong company - dividend payments can change, potentially going to zero, and inflation is eating your base value if the share price doesn't increase. For example, after 50 years, you might have made 50 $ in dividends, and the share value is still 200 $, but those 200 $ buy you now one package of ketchup in McDonald instead of 40 Big Macs.

External answer — Personal Finance Stack Exchange Author: dave_thompson_085 Original post: https://money.stackexchange.com/a/141445 License: CC BY-SA 4.0 — https://creativecommons.org/licenses/by-sa/4.0/ Adaptation: HTML converted to plain text; contact email addresses removed. The broker and exchange never ceases to exist, implying that I can hold the stocks for an infinite amount of time. These don't matter. To buy a publicly traded stock you must (practically speaking) go through a broker and they will go through some kind of exchange. But you don't need to hold with a broker; you can request they have you recorded as the direct owner by the company's registrar or transfer agent (the broker will often charge a fee for this). Even if you do hold with the broker, called 'street name', which most people do because it's convenient and the brokers encourage it, if the broker goes bankrupt or is shut down you still own the stock and the resolution process will transfer it either to your account with a new broker or to direct registration. You never need the exchange to hold a stock, only to buy or sell. The dividend is paid in a currency that never fluctuates. This assumption is even less realistic than the assumption you will live infinitely (or even that the universe will last infinitely) but since it's an assumption .... I never sell the stocks, buy more or trade them in any way and they are soul bound to my body. I'm not sure what 'soul bound' means, unless you are making an analogy that the stock's link to you is as permanent as the link of your soul to your body? If so, I don't think that's a good analogy because AFAIK every major religion holds that souls are linked only temporarily to bodies because bodies are NOT infinite. However, that's offtopic for this Stack. I've read in another thread that companies pay dividends but is the opposite true? If the company requires more financial support to survive (even if they never go bankrupt), can they force investors to contribute money proportional to the shares they hold? No. This feature -- that debts of the corporation can only be collected from it, not from shareholders -- is called 'limited liability' and is a major part of the reason that corporations became widely used for business in recent centuries. There can be an exception for someone who effectively controls a corporation and abuses that control, but not for you as a man-in-the-street investor. Note this protection is only for a traditional 'long hold' as you describe in your Q; it does NOT apply to other things like margin, shorts, options and some other derivatives where you can lose more money (sometimes much more) than your initial transaction. However, in addition to new issues causing dilution as RonJohn explained, one thing that can happen if the company is doing poorly causing its market price to go down and risk being delisted, they may do a reverse split to get the price-per-share back up (even though the market capitalization remains low). In that case if the share(s) you hold are not a multiple of the reverse split ratio the leftover shares will be cancelled and paid in cash, and if your total holding is less than the ratio this means your total holding will be paid in cash, effectively a forced sale at the current market price, which must be low for this situation to occur, thus violating your assumption and giving you a realized loss. Also where do I see the dividend the company offers? 'offers' is not exactly right. In practice no company ever promises a fixed dividend on common stock; payment of dividends is always subject at least to approval by the directors, and in some countries also to a shareholder vote. And generally dividends are only paid if the company has profits -- either current, or retained from a previous year when they were not distributed; I think this may even be required some places. In US a company can make distributions exceeding profits, but legally they are not dividends; instead they are return of capital, and treated differently for tax purposes -- and companies that do this more than rarely are likely to fail, violating your assumption that the company continues indefinitely. What you can find out is what dividends the company has paid on the stock so far , and then make your own estimate whether that will continue the same, increase, decrease, or stop. Especially given your assumptions, it might be wise to remember Stein's law: "if something can't go on forever, then at some point it will end". Practically all financial data sources include the 'current' (usually meaning most recent quarter, sometimes most recent year) dividend yield. If you have an account with a broker, and online access, they will usually make more extensive data accessible (for more or less all listed stocks), though exactly what may vary. The issuer company will always provide complete information for themselves only on their website (usually in a section called "investor relations") and usually will mail a paper copy if you ask them.

External answer — Personal Finance Stack Exchange Author: Chris H Original post: https://money.stackexchange.com/a/141529 License: CC BY-SA 4.0 — https://creativecommons.org/licenses/by-sa/4.0/ Adaptation: HTML converted to plain text; contact email addresses removed. Assumptions 1 and 3 are simply too unrealistic for this to relate to the real world. There's always a risk companies can fail, however successful they might have been for the last decade or so. There's always inflation (well, there may be deflationary blips, but you're talking about integrating over long periods) eroding your capital and any dividends. The company may stop any dividends for reasons beyond your control, e.g. my shares in a couple of restaurant/pub companies during Covid; they've also dropped in value a lot. This means you can't bank on dividends making up for loss of value to inflation if you want 100% certainty. Note that assumption 2 might not matter: The broker I used effectively no longer exists (they sold the business to one that only deals in nominee holding and mine are direct), which makes it a bit harder for me to sell. Holding the shares is no problem.

External answer — Personal Finance Stack Exchange Author: user662852 Original post: https://money.stackexchange.com/a/141540 License: CC BY-SA 4.0 — https://creativecommons.org/licenses/by-sa/4.0/ Adaptation: HTML converted to plain text; contact email addresses removed. There is a case where this could occur. Point 2 in the OP question appears to assume that this is a publicly traded corporation on a regulated stock exchange, but this is not exactly explicitly stated as an assumption (and is focused on the broker-agent and exchange not failing, not that there must be one). There can be a scenario where you hold stock that you paid for, in a kind of company, that is perpetual or intends to be, and where you can be required to put in more funds. A general partnership is a form of company, with stocks to track ownership, that can force the partners to contribute more funds as the partners have unlimited liability to this form of company. This form of company is not listed on public exchanges, but if you are, for example, an associate consultant at a general partnership consulting firm who has "made partner" the other partners will sell or include in your compensation a quantity of the partnership stocks to you, exposing you to the partnership's liabilities.

External answer — Personal Finance Stack Exchange Author: Ben Miller Original post: https://money.stackexchange.com/a/141541 License: CC BY-SA 4.0 — https://creativecommons.org/licenses/by-sa/4.0/ Adaptation: HTML converted to plain text; contact email addresses removed. You have laid out a hypothetical scenario where you pay $200 for shares of stock that can never afterward be sold, traded, or transferred away. In essence, you’ve already lost your $200 as soon as you bought. A stock’s value is based on what you can sell it for. Since this stock in your hypothetical scenario cannot be sold, it has no value after you buy it. Now, you may be saying: “But after I buy it, I might be getting dividends in the future.” That is true, but since your stock cannot be sold, you cannot sell the right to these dividends. It is simply a fact of who you are, and has no monetary value to anyone but you. The $200 is a sunk cost, and whatever dividends the company decides to send you in the future (or not) is completely out of your hands. It wouldn’t cost you anything to hold the shares, but it is certainly possible that the dividends would decrease in the future, and that your shares will be diluted, reducing the percentage of the company you hold.