Owning a business vs owning a share

Have you ever wondered what it truly means to own a stock? Is it just a number on your screen that goes up and down? Or is it something more?

If you’ve ever run a business or thought of starting one, you’ll know that building something from the ground up isn’t easy. There are sleepless nights, tough decisions, and unexpected challenges. But with the right strategy, persistence, and a little bit of luck, businesses grow, generate profits, and create wealth. With investing, you can participate in the success of great businesses, without the daily stress of running one.

Today the distinction between investors and traders is narrowing. Holding periods have been reduced to a matter of days rather than years. This has contributed to share prices becoming more volatile. Other factors include:

However, for long-term investors willing to hold on for several years, volatility is a blessing in disguise as they can take advantage of sudden, unexplained plunges in stock prices to purchase stocks of good companies at attractive valuations.

Let’s dive deeper into this idea.

The Fundamental Difference: Control vs. Participation

When you own a business, you are in the driver’s seat. You control decisions—what to sell, whom to hire, how much to reinvest, and what risks to take. Your rewards are directly linked to how well you run the business. But along with that comes a lot of responsibility:

• You need to manage employees, customers, and suppliers.

• You deal with economic cycles, regulations, and unexpected challenges.

• You must constantly innovate to stay ahead of competitors.

When you own a stock, you become a shareholder—a partial owner—but you don’t make the day-to-day decisions. Instead, you trust the management team to run the company. If they succeed, you win. If they fail, you lose.

The advantage?

• You don’t have to handle the stress of running a business.

• You can invest in multiple businesses and diversify your risk.

• You can liquidate your investment much more easily than selling an entire business.

Owning a share is like being a silent partner—you benefit when the business does well, but you don’t have to be involved in operations.

Businesses (and Stocks) Have Their Ups and Downs

Every business, no matter how great, goes through cycles—booms, downturns, and recoveries. The stock price of a company reflects this, but often in a more exaggerated way.

For example, Amazon was once a small online bookstore. In its early years, it struggled to turn a profit. It went through major crashes during the dot-com bubble, the 2008 recession, and even COVID-19. Each time, its stock price plummeted. But what happened next? The business continued to grow. Those who stayed invested saw their wealth multiply many times over.

Now, contrast this with traders who bought Amazon stock only to sell it when the price dropped. They missed out on long-term gains because they focused too much on short-term price movements rather than the underlying business.

The lesson? Stock prices fluctuate, but what matters is the strength of the business behind the stock.

The Reality of Investment Returns

Many people believe that investing in stocks can make them rich overnight. While it’s true that some stocks deliver exceptional returns, sustainable wealth is built over time.

To put things in perspective:

• Over the last 20 years, the Indian stock market (Sensex) has delivered around 12-15% annualized returns.

• A ₹1 lakh investment in 2003 could be worth ₹15-20 lakh today, assuming steady long-term investing.

• However, within these 20 years, there were multiple market crashes—2008, 2011, 2016, and 2020—when investors saw their portfolios fall 30-50%.

• Those who panicked and sold lost money. Those who stayed invested saw their wealth grow.

Now, here’s a crucial point: Even great businesses don’t give returns consistently every year. Just like real businesses have tough years, so do stocks.

A business owner doesn’t shut down a store just because sales dip one quarter. Similarly, a long-term investor doesn’t sell shares just because the stock price falls temporarily.

The key? Patience and conviction.

How AI is Changing the Game

One of the biggest shifts happening today is the role of AI in business. Whether you own a business or invest in stocks, AI is impacting every industry.

🚀 Companies that use AI to optimize operations, personalize customer experiences, or enhance decision-making are seeing huge competitive advantages.
🚀 Tesla, for example, is not just a car company—it’s an AI-driven transportation and energy company.
🚀 Mutual funds and hedge funds are using AI-driven algorithms to find undervalued stocks and maximize returns.

What does this mean for investors? Businesses that adapt to technological changes will thrive. Those that don’t will disappear.

This is why investing isn’t just about picking stocks randomly—it’s about understanding where the world is heading and positioning yourself for the future.

Mutual Funds: A Smarter Way to Invest in Businesses

Not everyone has the time or expertise to analyze individual companies. That’s where mutual funds come in.

Many equity mutual funds invest based on the principles of value investing. Their fund managers don’t see stocks as just numbers on a screen; they see them as businesses.

They typically look for companies with:

• Low debt burden – Financially strong companies that won’t collapse in a downturn.

• Strong brand and business model – Businesses that have a competitive edge.

• Stable earnings – Companies with consistent profitability.

• Competent leadership – Management teams that prioritize shareholder value.

Most importantly, they hold on to these businesses for years, rather than constantly buying and selling stocks. This low turnover strategy aligns with Warren Buffett’s famous philosophy:

"If you aren’t willing to own a stock for 10 years, don’t even think about owning it for 10 minutes."

If you want to invest like a business owner—but without the stress of managing a company—mutual funds can be an excellent solution.

The Final Thought: Your Role in Wealth Creation

At the end of the day, whether you own a business or invest in stocks, the goal is the same: to create long-term wealth.

If you are someone who loves taking charge and building something from the ground up, running a business may be the right path for you.

If you prefer to grow your wealth by investing in businesses without being actively involved in operations, investing in stocks or mutual funds is a powerful way to do it.

Whichever path you choose, remember this: Wealth isn’t built overnight. It’s built by making smart decisions and staying patient through market cycles.

If you’d like to discuss anything related to investment strategy, let’s chat.

To your financial success,
Tejas Lakhani
Fincare Services

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