FT.com / Investments - Fund investment hits record levels.
The FT notes:
Private investors bought into funds at record levels towards the end of 2009.
Figures released on Tuesday by the Investment Management Association (IMA) show that net retail fund sales in November 2009 rose, month-on-month, to £2.4bn — the eighth consecutive month in which inflows from private investors topped £2bn. T
But let's be clear: buying second hand equities is not investment. No new economic activity results (except a rake off for the City). No productvity is promoted, no new asset results.
This is saving.
Saving is not the same as investment.
Surely the FT should know that and stop promoting the lie that the City likes to promote - that what they do when promoting saving is useful for the greater economy - when too rarely that is the case.
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Buying ‘second hand’ equities is rarely ‘new’ investment; it typically redistributes ownership of the existing K-stock between optimists and pessimists about a particular share valuation. I think you could argue that such activity is not ‘new’ saving either, since the funds usually come from some other forms of saving. You’re quite right to chastise the FT about its lazy use of language, although financial journalists are often guilty of such practice.
Buying second hand equities may not be new investment, but surely there would be no investment at all if the opportunity did not exist to subsequently exit the investment. And that requires a secondary market.
Mad
a) The volume of sales cannot be justified
b) Of course there is a need for a secndary market – but it must be correctly labelled
c) Keynes was right – a few minutes trading time a day would be ample
d) Savings should be given incentive to create real investment. No tax relief on pensions unless used that way, for example
Richard