Saturday, February 5, 2011

The pride of ownership

It's always awesome to think about the stocks you own as representing part-ownership in businesses as opposed to pieces of paper that move up and down in price everyday. I get a mental boost every time I see someone wearing a pair of jeans that's made by a company I own stock in and think to myself how I got a small part of the profit (a very minuscule part to be exact) from the sale of that pair of jeans.

When I'm on a bus on the way back to my hometown, and I pass by a plantation belonging to a conglomerate that I'm a part-owner of, I'll imagine all the palm oil being harvested there and how that company, a company I own a tiny piece of, is responsible for employing thousands of people. I would look around at all the happy people at one of the best shopping malls in the country, a shopping mall I'm a shareholder of.

By thinking about stocks as real businesses that earn profits, employ people, make products, and create value for customers, we will not only be able to shrug of the need to take part in speculation, but we will also be able to make better investment decisions as well. When we think like business owners, we start looking at things like competitive advantages, returns on equity, sustainable growth, what are reasonable prices to pay for shares in businesses, and etc; these are the things that we should think about if we want to find investment opportunities that have the potential to deliver really spectacular returns.

It's also just plain awesome to drive around and see restaurants, office buildings, petrol stations, or whatever businesses that you're a part-owner of and get a cut of the profits from. It's like you're watching over your business empire (even if it might be a very small empire). That to me is the pride of ownership.

Thank you for reading, and may you always sustain good returns on your portfolio. Take care.