People often trade stocks as if they were baseball cards. They know when a company (player) is doing well and they speculate that if performance continues, they will be able to sell the stock (card) for more money.

What if Congress passed a law that prohibited the sale of stock. You could buy it, but you couldn’t sell it (never mind the inconsistency). As in musical chairs, the music stopped. How would you feel about what you own if you were stuck with it? If you made investment decisions based on the principal that the value of an investment is a function of the cash it can give you back, this probably would not be a big deal. You made wise capital allocation decisions.

If you have speculated on the greater fool theory, assuming someone will pay more for something without intrinsic value, you might be in a bad spot.

Business owners usually run their business to generate cash and profits. Maybe they plan to sell someday, but they know that future valuation will be based on profitability and/or liquidation value, not speculation.

When buying stock, consider whether you’d want to own the whole company if you could afford it.