Short answer: It happens when you own a piece of human progress.
When someone says “put your money in the stock market,” your brain might go, “Okay but… who exactly is giving me this money back? And why?”
If that’s you, welcome. This post is your warm bowl of clarity soup.
The Stock Market = Ownership, Not Magic
When you invest in a stock, you’re buying a teeny-tiny piece of a company. It’s not just some number on your screen, you actually own a slice of, say, IKEA if it were publicly traded (it’s not, but let’s pretend).
If the company does well, grows profits, or becomes more valuable… that teeny slice becomes more valuable too. That’s what we mean when we say “the stock price went up.”
You can sell your slice later to someone else for more money. That’s how you “make” money. It’s not free cash. It’s someone paying you to take over your share.
What About Index Funds?
Now, imagine you’re too tired (you are) to pick individual companies, so you buy a basket i.e., “an index fund” that owns hundreds of companies at once.
Think: “One basket to rule them all.”
This spreads your risk. Some companies will thrive, some will flop, but you get the average result. Historically, the average has been… pretty decent.
Why Does the Market Grow Long-Term?
Because economies grow.
More people, more technology, more consumption = companies sell more stuff.
That growth drives profits, which drives stock prices up over time. Not every day, not every year, but over decades.
It’s like watching your toddler grow — painfully slow some days, terrifyingly fast others, but inevitable in the long run.
Where’s the Actual Money Coming From?
- From other investors buying your shares when they think the price will go even higher.
- From companies paying dividends (small cash payouts to shareholders, usually optional in index funds).
- From overall market growth, which reflects real economic activity — jobs, production, services.
No one is printing free money for you. You’re tapping into real global productivity.
Why Does It Sometimes Go Down?
Because investors panic. Or inflation spikes. Or pandemics happen.
Markets are emotional. But they recover. They always have. That’s why investing is a long game.
What Should You Take Away?
- You’re not “gambling”, you’re owning a piece of human progress.
- Index funds = the mum hack of investing. Broad exposure, low drama.
- The longer you leave it, the better the odds you’ll come out ahead.
- There are no guarantees but not investing comes with its own risk: your money shrinking in a savings account.
Quick Glossary:
• Stock – aktie – A tiny ownership stake in a company.
• Index Fund – indexfond – A basket that tracks many stocks at once, usually cheap and passive.
• Dividend – utdelning – Cash a company pays out to shareholders from profits.
• Market Cap – börsvärde – Company size (share price × shares).
• Volatility – volatilitet – How wildly a price swings up and down.
• Bull Market – bull-marknad – Prices trending up; everyone’s smug.
• Bear Market – bear-marknad – Prices trending down; everyone’s grumpy.
• Compound Growth – ränta-på-ränta-effekt – Money earning money on top of previous gains.
• Schablonintäkt – (same in Swedish) – Sweden’s pretend profit used to tax ISK/KF accounts; see the full glossary if this still scares you.A bigger glossary is available here.
Got thoughts? Questions? Drop them below — I read everything and reply when the kids are asleep and I’m not halfway through a pension crisis.