From what I understand is that Bonds and loans have extrinsic value, i.e if I decide to lend my money to someone or an organization, I will get paid a certain interest on the money that I lent, as well as receive my principal back after the maturity period.
However, the stocks that we invest in, don’t seem to have any intrinsic value attached to it. The company doesn’t pay me the principal that I invested in, the paper value of my principal just increases or decreases depending on how well the company is doing in the market scenario. It doesn’t hold a physical value. And the paper value of my investment will mean nothing until someone else decides to buy it.
The company might pay me the profit that they earned in terms of cash dividends but will never pay me back my principal ever. And when I am buying stock from someone, how is the paper value of that stock calculated in terms of real/ tangible money that I need to pay to buy it? And what motivates people to invest in something that doesn’t even have a physical presence and only exists abstractly?