Equity!
To get wealthy, you must own a piece of business, if not, a business or otherwise called as Equity.
The best thing about the world is, it will give you what you want if you give it what it wants.
When the world wanted something, which can transport people much faster than a horse cart, Henry Ford gave the world an automobile. And in return for it, Henry Ford got the money.
When the world wanted an alternative to whale oil for lighting up the lamps at nights, Edison gave the world an electric lamp. And he got rich out of it.
When the world wanted to shop online by not wasting time going offline, Jeff Bezos gave the world an Ecommerce site. And he became the richest man ever.
So, the people who give the world what it wants, which it does not know how to get, can get rich.
Simply put, create value, and trade this value with the world for money. And we call this as business.
But how practical this value/Business creation is for everyone?
Truth be told, this value creation is a tiresome process, demands sacrifices, and it is risky. Chances are high that you will fail in your business venture, even though the underlying value creation can be drilled down only to the below three things:
Help the world to make money.
Help the world to save money.
Help the world to save time.
Can we make money without really creating the value or business by ourselves?
What if we can just help people who are creating a business and take a share of the profit from business.
Yes! You can do this.
You can help someone who can create that business for you. You can lend your money and later share the profit.
You will be rewarded as much as you expose yourself to this risky game of business or value creation.
But how would you be able to buy the business, and where can you buy the business?
You buy a piece of an existing business by buying an equity of it. Shares of a business.
By buying a share/equity of a business, you are helping it to expand more, do business more, thus create more value to the world. Since you are helping the business in this endeavor, you are rewards higher when the business makes a profit.
And when it comes to where you can buy business is, Stock Exchanges.
In India, we have two main Stock Exchanges, Bombay Stock Exchange, and National Stock Exchange, which will help you in buying equity legitimately.
All the companies which want to sell their equity at the stock exchange, need to get listed in the stock exchange. For this, the company/business should adhere to a set of rules imposed by the stock exchange. These rules are only to help the investor, to make sure that we are not investing in an illegitimate business and also to make sure that the business stays accountable to its investors, that is, WE.
Stock Exchange has many names, but the most common one is Capital Market. Stock Market. Market Place.
There are two ways to buy equity in the market(Capital Market).
First one would be, you do your research on a particular business and make the decision to buy it directly from the market by taking help of any brokerage firm to facilitate the transaction to happen.
Second, If you don’t want to research or feel like you are not competent enough to make a decision on whether to buy a business, then you buy a mutual fund, where a fund manager would buy an equity on your behalf with your money, while you pay the fund manager a nominal fee for the services rendered.
Stock Market is not a casino to gamble. It is place where you can buy a piece of business.
Till now, we had a look at what is equity, what is stock market and how we can buy business in stock market. In the next edition of Minutia, let’s see why owing an equity rewards more than any other asset classes, and every investment portfolio must contain equity.
Until next time,
Peace out!