Today, many investors view investing as simply trying to profit off “the market.”
Have we lost the perspective that investing connects us directly to businesses?
Our last video of our Timeless Truths for Investing series explains how recapturing this perspective of investing in businesses may change your approach to investing.
Read the Transcript:
Jason Myhre: “Invest in businesses, not markets. I have a conviction that I would say most of us have really lost sight of what investing is all about and the true purpose of investing. We’ve lost this perspective that investing has a connection to business and that we’re actually supplying capital that supports business. Today, I think that many investors really picture investing as trying to profit from the market itself. It’s a very abstract, magical view of the stock market where you kind of put your money in to this financial machine. You try to ride this wave over time. You hope that it spits out a greater dollar amount in the future. Most of us are not really thinking about investing in businesses, supporting businesses, or profiting from a productive and intrinsic activity from businesses.
Why is this a problem? Well, it’s a problem because number one, if your relationship is with the market, that means your confidence is gonna ebb and flow based on the performance of the stock market. So when the stock market’s doing well, you’re gonna feel great. When the stock market’s doing poorly, you’re going to feel down or concerned. But there’s a more profound reason that this is a problem. I want to share with you, this is a quote from William Kavanaugh, who is a professor from DePaul University, who remarks, “retirement accounts tend to just go into mutual funds whereas an investor, not only do I not have any idea how the companies that I have stock in are being operated, I don’t even know what companies I have stock in. And these investments tend to be run by an elite of managers whose one preoccupation is with increasing the bottom-line profit.” 1
Have you ever thought about investing and just wondered, where does the money come from? What am I involved in here? What are the businesses that I own? What are the products and services that I’m investing in and profiting from that are driving these returns? And how well aligned or not aligned are these businesses with my beliefs, convictions, and values? Investing is company ownership. At its most essential, investing involves a supply of capital to support business in exchange for ownership in that business, which is what gives you the rights to receive any of the profits and growth that might come in the future. When you see investing this way, you realize, oh, I’m not profiting from a chart. I’m profiting from specific businesses that are doing real things, having a real impact in the lives of others.”