Purchasing stocks essentially means acquiring a part of a business. Many people tend to focus solely on the fluctuations in stock prices, but behind the stocks are numerous individuals who work for the company. They play a crucial role in supporting the company’s growth and profits through their daily operations.
Companies have various forms of capital and mechanisms in place to generate profits. By understanding these mechanisms and buying shares of valuable companies, we can participate in their growth. Specifically, excellent managers develop strategies, and employees execute those strategies, enabling the company to achieve sustainable profits. The stocks you purchase distribute those sustainable profits to you.
Therefore, investing in stocks is not just a means of investment but also an opportunity to contribute to the company’s growth as a member of the business. Through stocks, you can enjoy the company’s growth while participating in a system that leverages the efforts of its managers and employees to earn profits. By thinking this way, you can gain a deeper understanding of the essence of stock investing and make more informed investment decisions.
A Gateway to Business Ownership through Stock Purchase
When starting out in stock investing, what many people first notice is the movement of stock prices. It’s easy to get caught up in the daily ups and downs, but what’s truly important is the business behind the stock itself. Purchasing stocks means owning a part of an actual existing business. This is also a step towards becoming a business owner.
The Mechanism of Having Others Do the Work
One of the attractions of stock investing is that by providing capital, you don’t need to run the business yourself directly; instead, the company’s management and employees utilize that capital to develop the business. Specifically, the following mechanisms are at work:
Professional Management Operations: Companies hire professional management teams who efficiently manage the capital provided by shareholders. As an investor, you don’t need to be involved in daily operations or strategic decision-making; you can leave it to the experts.
Leveraging Economies of Scale: By pooling large amounts of capital, companies can undertake projects that individual investors couldn’t achieve alone. For example, they can invest in large-scale manufacturing equipment or expand into international markets—investments that would be difficult for individuals.
Risk Diversification: Investors can spread their risk by holding shares in multiple companies. If you invest all your funds in one company, the risk of failure is high, but diversifying across several companies can reduce overall risk.
Riding Along with the Company’s Profit-Making Mechanism
Owning part of a business through stock purchase means that stock investing allows individual investors to “ride along” with the profit structures of large or successful companies that they couldn’t build themselves or even find employment in. There are almost no people who can start, grow, and manage companies like Apple, Google, Amazon, or Tesla. Even getting a full-time job at these companies is extremely difficult. However, simply holding shares traded on the stock market allows you to reap the rewards!
Engaging with the Essence of the Company
By purchasing stocks, you gain opportunities to deepen your understanding of the company’s business model, products, services, and its position in the market. Analyzing the company’s financial situation and growth strategies allows you to view your role not just as an investor, but as a business partner. This way, you can feel your own contribution to the company’s success, making your investment more meaningful.
Leveraging the Power of Managers and Employees
As a shareholder, you play a role in supporting the company’s growth alongside its managers and employees. Excellent management teams determine the company’s direction, and employees create value through their daily work. Your investment serves as a funding source for them to achieve better results, promoting the overall growth of the company. This creates a win-win relationship where the company’s success leads to profit distribution to you as well.
Investing with a Long-Term Perspective
Stock investing is not about chasing short-term profits but supporting the company’s growth with a long-term perspective. Instead of getting upset over temporary stock price fluctuations, it’s important to understand the company’s business model and market position and expect sustainable growth. By investing with a long-term view, you can achieve stable returns alongside the company’s growth.
Making Money Work by Actually Having People Work
Purchasing stocks essentially means owning a part of the company and being involved in the overall operation of the business. While investment is often described as making “money work for you,” a deeper look reveals that behind the money are people working, and the profits they earn through their efforts are distributed to you as dividends or capital gains. This perspective of “having others do the work” can help you view stock investing. I hope this article has helped you understand this.
