This comparison between a stock market investment and a down-to-earth business came to my mind long ago but never had the interest to write a blog entry. Today, as I read more books on investment and business, I find similar traits that exist between the two.
Going into the technical details, both are largely similar, and even related to each other:
Raising Capital
You need a certain amount of capital to start both investment and business, depending on the current market price for the stock and the current market value for the business. Investors and entrepreneurs are raising capital to start their dreams, either by working as an employee, pairing up with partners, or borrowing funds from financial institutions. A entrepreneur can raise capital through investment in the stock market, while an investor can also do that through earnings proceeded from his business.
Knowledge and Experience
Both investment and business require vast knowledge and practical experience in order to do well. An investor and an entrepreneurs spend many hours on research before and during their course of investment/business, by reading books, acquiring techniques from experts, sharing of knowledge through partnership, attending seminars, and most importantly learning from mistakes.
Objective
Both worlds seek to earn money, what else can there be? But unlike an investment, a business doubles up as a platform to satisfy societal needs. For example, a car business aims to satisfy the needs of affluent people with transport convenience and social status.
Counter vs Outlet
Any investment or business requires a platform to grow. In an investment, a platform is known as a counter. An investor buys a stock and it automatically becomes a counter. Likewise, a entrepreneur starts his business in an outlet, can be in the form of retail store, a showroom, an office, or street venture depending on the nature of his business. But unlike a counter, an outlet needs physical maintenance and staffs to run the show, which translate into a higher price than the investment which is nothing more than a digital figure presented on the computer screen.
Communication
A private investor who operates on an one-man show does not need to have a set of good communication skills, especially in this Information Age where internet has allowed private investors to skip communicating with their stock brokers and financial managers. Private investors are no longer depending on these 'middlemen' to carry out basic routines such as buy/sell orders. On the other hand, public investors who are working for investment institutions such as DBS Vickers Securities, as stock traders or stock analysts need to communicate well with their clients. Unlike a private investor, a successful entrepreneur is a powerful communicator. Good communication will produce good businessmen. All businesses are public. Entrepreneurs need to communicate effectively with their buyers in order to sell their products.
Human Resources
If there is any major difference between the two, I would say it will be the human resources. A business requires a CEO, various managers, executives and junior workers (unless it's a sole-proprietorship which doesn't sound like a business to me due to its one-man show structure). Investors do not need that kind of hassle structure. They are everything themselves. They research on new stock products, manage their own investment accounts, analyse the stocks via fundamental analysis and technical analysis, buy and sell stock products themselves, etc. Investors are like sole-proprietorships but require no registration, no communication, no physical outlet, and lower capital.
***
End of the day, I would say that both are the same, actually. An investor is a businessmen and a businessmen is an investor. Sounds complicated? A businessmen invests his time and money on a business while an investor too, invests on stocks that are part of the business. For example, I own part of AIMSAMP and Starhill Global through shareholdings. There are disparities between the two but ultimately, on a personal agenda, is to earn money, and on a macro agenda, is to start a business or investment and work towards one's goals.
Well, no doubt some people will not label an investor as an entrepreneur. But having carried the same set of elements and skills as an entrepreneur, there is this term known as "entrepreneurial investor". That is, to invest on the stock market from the perspectives from an entrepreneur. So, when people ask me whether do I own a business, I would reply with a yes. I own businesses via shares and there are already the company's management and board of directors to perform all the daily operations for me. If the company no longer meets my expectations, I will sell away this counter (like closing down a non-profitable outlet), identify another good company and invest in it when the correct timing permits.
No comments:
Post a Comment