Does investing more money into stocks increase chances of profit?
I think you are mixing up the likelihood of making a profit with the amount of profit. The likelyhood of profit will be the same, because if you buy $100 worth of shares and the price moves up you will make a profit. If you instead bought $1000 worth of the same shares at the same price and the price moved up you would once again make a profit. In fact if you don't include commissions and other fees, and you buy and sell at the same prices, you percentage profit would be the same.  For example, if you bought at $10 and sold at $12, you percentage gain of 20% would be the same no matter how many shares you bought (not including commissions). So if you bought $100 worth your gain would have been 20% or $20 and if you bought $1000 worth your gain would have been 20% or $200. However, if you include commissions, say $10 in and $10 out, your net profit on $100 would have been $0 (0%) and your net profit on $1000 would have been $180 (18%). The investment return for a given strategy is directly proportional to the amount invested. Invest twice as much, profit (or lose) twice as much. It's a straight multiplier. However, there are some strategies which are less risky with a larger investment, and some investments which have a minimum unit of purchase that puts them out of reach of smaller investors. Have a read of this PF&M article, which @Blackjack has an excellent answer that speaks around risk. Answers which suggest that the return is proportional to the amount invested is a very simplistic argument. It is far more complex than that. I would content that your initial question Does investing more money into stocks increase chances of profit? is not the best question. The answer is it depends upon your investment methodology. The following will increase your chance of overall profit in the stock market
"There are a few different ways you can look at this.  You can't really take money out of the economy, as it can't ""leave society"" and the economy is the interaction of society. One example kind of close to this was a multi-millionaire died without an heir with millions in his bank account. The bank will continue to use the funds, but the money itself won't be spent. Some people saw this as a ""waste"", like value was lost, but really all it does (hoarding money or even burning it) is change the money supply.  That being said there are two approaches to looking at capitalism as a *balanced* ecosystem. One is Keynesianism, which focuses on demand. The other is Marxism, which focuses on more internal mechanisms of capitalism. Both are concerned with inequality.  With high inequality, those with capital tend to have more reinvestment as a percentage of income/wealth. With a return on investment this will increase inequality. The Keynesian issue is that this will lower demand, creating imbalance in the economy and long-term problems to function. The answer was more redistribution and higher labor wages.  For Marxists, they believe that capitalism generates endless ""capital accumulation"", not because of a demand component, but because of labor theory of value. That wealth and value is not determined by the market, but at exploitation of labor. On this critical side you have critiques of the fetishism of market value. With high inequality you have money ""leaving the system"" in what some call waste--something not socially useful. Baran and Sweezy in ""Monopoly Capital"" talk about this in the form of things like military spending, and, I think, advertisement. But it can also relate to the generation of ""wealth"" (opposed to income). Things that don't hold inherent value, like art, becomes investment. You can't say it is ""taken out of "" the economy, but the value itself is generated by those who can purchase it. Though, I believe this value fetishism is more an outcome of the contradictions, rather than the cause.  What it does contribute to contradictions, however, is the rise of speculation. Rather than consumption or productive investment, accumulation will increasingly become speculative. Real estate is usually the primary example. Many people buy houses, condos, or land, not for use, but for the expectation that the value will go up. When bad enough this can reshape the market, so for people who aren't investing their rent/living cost increases.   This likewise happens with stocks and other financial investments. Again, it can't really ""leave the economy"", but it makes it more difficult for the ""traditional"" or productive and labor economy to operate." "If you own 1% of a company, you are technically entitled to 1% of the current value and future profits of that company. However, you cannot, as you seem to imply, just decide at some point to take your ball and go home. You cannot call up the company and ask for 1% of their assets to be liquidated and given to you in cash. What the 1% stake in the company actually entitles you to is: 1% of total shareholder voting rights. Your ""aye"" or ""nay"" carries the weight of 1% of the total shareholder voting block. Doesn't sound like much, but when the average little guy has on the order of ten-millionths of a percentage point ownership of any big corporation, your one vote carries more weight than those of millions of single-share investors. 1% of future dividend payments made to shareholders. For every dollar the corporation makes in profits, and doesn't retain for future growth, you get a penny. Again, doesn't sound like much, but consider that the Simon property group, ranked #497 on the Fortune 500 list of the world's biggest companies by revenue, made $1.4 billion in profits last year. 1% of that, if the company divvied it all up, is $14 million. If you bought your 1% stake in March of 2009, you would have paid a paltry $83 million, and be earning roughly 16% on your initial investment annually just in dividends (to say nothing of the roughly 450% increase in stock price since that time, making the value of your holdings roughly $460 million; that does reduce your actual dividend yield to about 3% of holdings value). If this doesn't sound appealing, and you want out, you would sell your 1% stake. The price you would get for this total stake may or may not be 1% of the company's book value. This is for many reasons: Now, to answer your hypothetical: If Apple's stock, tomorrow, went from $420b market cap to zero, that would mean that the market unanimously thought, when they woke up tomorrow morning, that the company was all of a sudden absolutely worthless. In order to have this unanimous consent, the market must be thoroughly convinced, by looking at SEC filings of assets, liabilities and profits, listening to executive statements, etc that an investor wouldn't see even one penny returned of any cash investment made in this company's stock. That's impossible; the price of a share is based on what someone will pay to have it (or accept to be rid of it). Nobody ever just gives stock away for free on the trading floor, so even if they're selling 10 shares for a penny, they're selling it, and so the stock has a value ($0.001/share).  We can say, however, that a fall to ""effectively zero"" is possible, because they've happened. Enron, for instance, lost half its share value in just one week in mid-October as the scope of the accounting scandal started becoming evident. That was just the steepest part of an 18-month fall from $90/share in August '00, to just $0.12/share as of its bankruptcy filing in Dec '01; a 99.87% loss of value. Now, this is an extreme example, but it illustrates what would be necessary to get a stock to go all the way to zero (if indeed it ever really could). Enron's stock wasn't delisted until a month and a half after Enron's bankruptcy filing, it was done based on NYSE listing rules (the stock had been trading at less than a dollar for 30 days), and was still traded ""over the counter"" on the Pink Sheets after that point. Enron didn't divest all its assets until 2006, and the company still exists (though its mission is now to sue other companies that had a hand in the fraud, get the money and turn it around to Enron creditors). I don't know when it stopped becoming a publicly-traded company (if indeed it ever did), but as I said, there is always someone willing to buy a bunch of really cheap shares to try and game the market (buying shares reduces the number available for sale, reducing supply, increasing price, making the investor a lot of money assuming he can offload them quickly enough)." To quote Adam Smith, 'Everything is worth what its purchaser will pay for it'. In this case, that means, the value of a stock is equal to the price that someone will pay for it. If you buy shares in a company, the number of people who want shares in that company has just gone up by 1. If you buy shares in companies profiting from the DAPL, you are increasing demand for those shares. You are actually making those shares more valuable, not less. If you bought all those shares, then you could simply shut the pipeline down. But that means you'd be spending billions of dollars to do so - and that money would go to the people who own the company now. The concept of 'Shareholder Activism' that you refer to, is actually more that an individual who owns a substantial number of shares (usually in the 10% ballpark) will become outspoken on the direction of the company, and attempt to elect board members who will take action to suit their liking. This is done to increase the profits of the company, so that the shareholder can make more money off of their investment. It is very expensive, and not generally done for reasons of 'ethics', unless those ethics align with a view to long-term profit (in this case, you'd need at least $1Billion to buy enough of a stake in the DAPL to make a difference). What you may instead want to consider is 'ethical investing'. This refers to the concept that you should only put your investments in companies which act ethically. For example, you could buy shares in a solar company, if you felt that was an ethical industry. In this way, you drive up demand for those types of companies, and reward the business owners who act in that fashion. "The implication is market irrationality is stronger than market rationality. Aka nothing makes sense when TSLA climbs to $400 or when CMG rises to $750.   I wouldn't say there is a systematic flaw in valuation. I think there is just a lot of ignorance. Markets are more open to household investors than ever before. You used to go to your broker and ask him what's up and he'd give you the inside scoop since you pay them money. Now you go onto marketwatch and get some random nobody's opinion on everything and make stock selections based on that.   But eventually the chickens come home to roost and things will correct itself. Big players will jump ship and cause signals to other traders to jump ship. The public can pump stocks up pretty high but it doesn't just go to infinity. Eventually someone will stop and say, ""wtf is going on"" and start selling. Stocks are sold on a basis of a limit order book so it's real prices that people are paying. People don't care about prices currently because most don't have any finance knowledge but want to invest their own money.  They just hear about Tesla doing something amazing (from some clickbait article or news outlet) and can't stop thinking about buying Tesla. They go to Chipotle and think ""wow this place is so good and hip, they must be a great investment"".   The markets have been filled with more subjective analysis than ever before especially with so much low quality information at your fingertips. Equally ignorant people startin blogs about investment and personal finance being shepherds for other ignorant people. In the end they all lose.  People who exclaim ""this stock is going up to $250 easily"" with literally zero quantitative analysis or even a baseline reference point to back it up are prime examples of this.   Ignorance of markets and cheap money almost always lead to market runs that end catastrophically. Dot com bubble, 1929 market crash, 2008, it's always the same. People who have no business taking loans out or buying on margin or leveraging positions with debt only to get fucked over once things are brought back down to Earth. After 2 runs of QE, we now have cheap money and with everyone being a crier for their personal investment strategy, we now also have rampant ignorance.   I don't expect things to last but no one can call the bottom or the top, or else you'd be very very rich. Have a safe portfolio, don't try to time the markets. Have a strategy that hedges against unexpected change, don't try to gamble on this change. Because it's ultimately impossible to predict the movement of every single person on this earth that invests their money into markets. So don't try. Just be prepared.   ----  To expand further into valuation theory:  at the end of the day, people invest their money to make more money.  It's as simple as that.  If your money doesn't grow in an investment vehicle, it's ultimately a shit investment.  But no one values intrinsic value of a company's equity before they decide whether or not $380 for TSLA is a good/bad deal.  As a result, stocks can be pumped up way higher and people still see the gains on their stocks through capital gains fueled by other optimistic investors.   Non-zero sum goes both ways.  People can make shitloads of money on stock without an equitable loser--people can also lose shitloads on stock without any real winner emerging from the rubble.  When this bubble bursts, lots and lots of people will lose money on TSLA when people's expectations become rational and they stop paying $300 a share for a negative or 70 PE ratio.  It's insane what multipliers people will pay for these companies without even realizing the implication--if you buy a share of a company with a PE ratio of 70, you just paid 70 times their earnings for a share.  In an ideal world where they released every single penny of earnings as dividends, it would take you 70 periods to reclaim your money on that share.  This obviously doesn't take into account capital gains, but capital gains aren't supposed to be this irrational to where a stock can be pumped up into 70x PE ratio in the first place.  It's a whole messed up web of confusion and irrationality and eventually something will catalyze a reaction.  Imagine a market where everyone just agreed to pump up a single stock to infinity and everyone just rakes in shitloads of money.  Would this work?  Of course not.  It's literally a pyramid scheme that relies on future generations to constantly inject capital--no real value is being created by this scheme.  It requires constantly more future generations to continue adding money into the scheme and will crash once people stop pumping money into it.  The same thing will happen here.  Everyone ""agreed"" to pump up TSLA (in a sense) but eventually people will realize this is stupid as shit and the pyramid will come tumbling down because there is nothing they receive from this scheme other than the money from other people.  It's essentially moving money around, making 0 use of it, until people stop pumping money into the system and everyone realizes that nothing of real value had been produced through the use of this money.  Ultimately the only thing that creates real value is the money that is returned to shareholders from an outside party--the company you're invested in.  Real value is not created when people exchange stock and money.  So why do these transactions create higher values in equity?  The basis of equity valuation states that dividends are the only way for companies to raise the price of their stock, going off the traditional Dividend Discount Model.  And theoretically, that's the only logical explanation.  Buying and trading stock does nothing for the company, minus T Stock they might own.  Ultimately the only party creating real value is the underlying company.  If they aren't creating real value, then their stock should not be increasing, period.  The way they create value is by efficiently utilizing assets to generate returns on investment which can be returned to investors through dividends.  Dividends can only be increased (while maintaining an equitable payout ratio) by generating more net income that can increase the actual pool of money that can be allocated back to investors.  TSLA does not do this.  TSLA regularly loses money and overpromises.  There is no logical explanation for any of this except that everyone is irrational.    Obviously theory is not the same as in practice but the theory is important here because it's really the basis for any investment at all.  At the end of the day, a share of stock is the right to a share of the company's equity.  People own equity in companies because companies generate money that it returns back to its owners.  That's what a company does.  That's what an owner does.  If you own shares of a company, you're an owner.  And if your company does not return more money back to you YoY, then why are you invested in them?    Ultimately, you're riding a capital gains wave that will eventually subside once market irrationality succumbs to rationality.  And it always does because the real value always catches up to the fake value that is caused by pumping and dumping stocks." Ramsey promotes Growth mutual funds and says he can screen out examples of good funds with a solid history of 10% returns in a couple of minutes on Morningstar.  The 12% in the video is fairly unrealistic, but 10% or 8% are realistic, especially when you buy into the market every month at all levels rather than chasing winners (buying high). At 10% you will still get $3 million in 40 years, and at 8% you'll get $1.5 million. You need to make sure you include reinvestment of dividends as well as mere price appreciation in these calculations of returns on investment. So yes, you could probably drive really nice cars this way without breaking the bank. Like any financial endeavor, this requires hard work, patience and discipline. The actual work in this case would be fairly minimal in comparison to the patience and discipline: If you get really lucky, you might end up with millions of dollars 40 years from now. If a health disaster, job loss, children's college, etc. strikes then you it might save you from financial ruin. Both are better than the rat race I agree his predictions are too rosy, but this ad is an emotional sales pitch designed to change goals and behavior. Compare it to the psychology and unrealistic claims in some of the auto commercials you see on TV. "There is actually a recent paper that attempted to decompose Buffett's outperformance. I've quoted the abstract below: ""Berkshire Hathaway has realized a Sharpe ratio of 0.76, higher than any other stock or mutual fund with a history of more than 30 years, and Berkshire has a significant alpha to traditional risk factors. However, we find that the alpha becomes insignificant when controlling for exposures to Betting-Against-Beta and Quality-Minus-Junk factors. Further, we estimate that Buffett’s leverage is about 1.6-to-1 on average. Buffett’s returns appear to be neither luck nor magic, but, rather, reward for the use of leverage combined with a focus on cheap, safe, quality stocks. Decomposing Berkshires’ portfolio into ownership in publicly traded stocks versus wholly-owned private companies, we find that the former performs the best, suggesting that Buffett’s returns are more due to stock selection than to his effect on management. These results have broad implications for market efficiency and the implementability of academic factors.""" Instead of giving part of their profits back as dividends, management puts it back into the company so the company can grow and produce higher profits. When these companies do well, there is high demand for them as in the long term higher profits equates to a higher share price. So if a company invests in itself to grow its profits higher and higher, one of the main reasons investors will buy the shares, is in the expectation of future capital gains. One reason why you may have gotten this advice is that stocks have an expected real return over time, while commodities do not. Therefore, when gambling on individual stocks, odds are in your favor that they will ultimately go up over time. You may do better or worse than the market as a whole, but they will likely go up as the whole market, on average, rises over time. Commodities, on the other hand, have no expected real return. It is more zero-sum. In fact, after costs, a real loss should be expected on average, making gambling in here more risky.