What are the advantages of buying stocks over doing business?

Chen Jiahe Chief Investment Officer of Jiuyuan Qingquan Technology

In the mainland capital market, stock investment is often stigmatized, and those who invest in stocks are often called “stock speculators”. In the simple cognition of many ordinary people, “specializing in stocks” is even similar to gambling and drug use.

At the same time, many people believe that it is the most serious business to do a business of their own, such as opening a shop, running a factory, or even contracting a fish pond. Compared with those who “speculate stocks”, doing business is simply a more legitimate thing.

In fact, the ownership of the property rights of a small business owned by business is determined by the Industrial and Commercial Bureau and other institutions, while the ownership of the equity of the secondary market stocks is determined by the Securities Registration and Clearing Company. From the perspective of assets, the two There was no difference.

What’s more, for value investors who invest and manage stocks as a business, rather than “hype” stocks as gambling chips, buying stocks actually has many advantages over running their own business. Here, let’s take a look at 6 obvious advantages of buying stocks over doing business.

Can do business that can’t be done normally

First of all, the best thing about buying stocks is that you can invest in businesses that are usually difficult to do. These businesses either require too much capital, or require government-approved licenses that are difficult to obtain, or have natural monopoly factors and cannot be involved with capital investment alone.

For example, for ordinary private capital, it is almost impossible to open a national bank: it requires at least 100 billion yuan of funds, which is too large. And to open a telecommunications operator, the difficulty of obtaining a license is like skyrocketing: there are only four operators in the whole of China. For some companies such as ports and airports, it is difficult to open a new company no matter how rich they are. Natural monopoly makes these business formats impossible to do with money.

However, in the stock market, when the shares of these companies are divided into parts, every investor can participate in these businesses. According to strict securities regulations, listed companies will treat the rights and interests of each shareholder fairly, and each shareholder will receive consistent profits and dividends. How can the convenience of such investment be comparable to doing business by yourself?

Diversified investments are safer

For general capital, if doing business, it is difficult to diversify. To open a large-scale hotel, the investment is often calculated in tens of millions or hundreds of millions, and the start-up capital required to open a factory is not less than tens of millions. Even if it is to open a supermarket or restaurant, it is difficult to get on the road without millions of capital.

At the same time, due to the limited energy of investors, even if the capital is sufficient, it is difficult to take care of several businesses at the same time. Especially for several businesses that are not in the same industry, it is even more impossible for one person to take care of them.

However, experienced businessmen know that once a big wave in the market hits, it may be a policy change, a technological iteration, or a turmoil brought by overseas markets. Any business may encounter a very difficult moment. At this time, it will be very difficult for those who do their own business: all their capital is in one business, and they must rely on their own tenacious struggle to survive the usual uncommon business crisis.

Buying stocks is different. Even if the principal is not large, as long as the research is careful enough, investors can easily spread their capital in more than a dozen industries and dozens of companies. This large-scale decentralization, as well as the commercial security and anti-risk capabilities it brings, are impossible to achieve by doing business by yourself.

There is no starting threshold, and it is not easy to hit the ceiling

For doing business by yourself, many businesses have thresholds to start. For example, as mentioned above, it is difficult to open a hotel without tens of millions of investment funds. Larger hotels may even cost hundreds of millions of dollars.

However, for stock investing, it can be said that there are few thresholds. Whether it is a business with a starting threshold of hundreds of millions, a business of tens of billions of dollars (such as airlines), or even a business of hundreds of billions of dollars (such as large hydropower plants, nuclear power plant groups), there are only tens of thousands or hundreds of thousands of yuan in investment. , you can also participate.

On the other hand, many businesses have ceilings, which means that the entire industry is so large that no amount of capital can accommodate it. At the same time, the competition within the industry is often saturated, and there are not many new entrants left.

For example, the annual sales volume of my country’s rice wine market is only more than 10 billion yuan (13.5 billion yuan in 2020). Based on a sales profit rate of 10%, the annual net profit of the entire industry is only more than one billion yuan. At the same time, the established companies in the rice wine industry have already firmly grasped the industry status. Since the taste of rice wine is only suitable for residents in Jiangsu, Zhejiang and Shanghai, it is very difficult to go out of the existing market and expand into new markets.

Therefore, the ceiling of the rice wine industry is very obvious, whether it is for companies that want to enter this market new or existing in the market.

However, compared to doing business, investing in stocks is less restricted by the industry ceiling. (Strictly speaking, the ceiling is still in place, but much better than the average industry.) For the good investor, as his wealth grows at a compounding rate, so does his size: Berkshire you. Hathaway is the best example.

Broader horizons and horizons

When doing business by oneself, people’s vision and vision are easily limited to one industry and one business. This is because the affairs of doing business by yourself are often too trivial, such as raw material procurement, employee management, plant construction and maintenance, production quality, dealing with government departments, financing, advertising, and so on. , firmly confined to this business.

Therefore, in the domestic business circle, a phenomenon has emerged in recent years, that is, the second-generation successors of many enterprises are unwilling to succeed their parents and elders. These successors often have received excellent domestic and international education. When they have read poetry and books and have seen the world, when they return to their own factories, many people are no longer willing to continue to work hard like the previous generation. Take care of your own property.

However, when it comes to buying stocks, because it is necessary to constantly learn various industries, and even after capital expansion, it is necessary to learn overseas industries and companies, so it is easier for investors to open up their horizons and broaden their thinking.

Easier to take care of

Anyone who has managed their own business knows that running a business can be very tiring. For example, restaurants should not be closed during the Spring Festival, otherwise they will miss the opportunity to make money from the New Year’s Eve dinner. In a milk tea shop, if the owner said that he would go out to play for half a month, then there must be more than half of the regular customers coming back.

At the same time, if there is an urgent matter in your business and you want to realize part of it, it is almost impossible. For example, a car repair shop has a market value of 5 million yuan. Now the factory manager wants to cash out 1 million yuan, that is, to introduce an investor and buy 20% of the factory’s shares. Is this possible? In theory, yes, but in practice, it is rare to find investors who are willing to become minority shareholders: 1 million yuan has also been given away, but no control over the factory can be obtained. If you want to distribute dividends, you have to look at the face of the major shareholder, not as good as yourself. It is easier to open a small clothing store with 100% control with 1 million yuan.

However, in stock investing, these two problems do not exist. For value investors, if you are too busy recently, just close your account and don’t read it, and profits, dividends, etc. will be automatically credited to your account (just pay attention to the occasional allotment of shares, allotment of convertible bonds, etc.). And on the issue of liquidity realization, the stock market is hanging itself on doing business.

It should be pointed out that a disadvantage brought by the higher convenience of stock investment is that it is impossible to do business by yourself. For people with very strong personal ability, although buying stocks can be more worry-free, it is also an obvious disadvantage because they cannot directly manage their own business. Of course, many people’s personal abilities are not much stronger than others, but they think they are particularly strong, which is another topic.

Mr. Market giving money

Finally, we come to the most important reason why buying stocks is better than doing business: In the stock market, there is a Mr. Market who will give you money all the time.

Anyone who has played games, mahjong and poker knows that the best way to win is not to work hard, but to find pig-like opponents. When I play tank games, sometimes I especially like to play low-level vehicles, because the opponent is too stupid, so it is easy to win. In the stock market, the grandfather of value investing, Benjamin? Graham, likened the market to such a “pig-like opponent”, that is, “Mr. Market”.

Mr. Market is very unstable, so you can use him as your opponent. When he is happy and excited, sell him the stock at a high price; when he is disheartened, take the stock back at a low price. . This comes and goes, and Mr. Market, the lovely Mr. Market, will send smart investors a steady stream of returns.

Issues to be aware of

Of course, buying stocks is not a business after all. For stock investors, there are some issues that are unique to stock investment, which need to be paid special attention. These issues include improving securities account security and anti-theft measures, and complying with securities market regulations. However, these problems are generally not difficult to solve as long as you pay attention.

The above are 6 reasons why buying stocks is better than doing business: you can do business that you can’t do normally, it is safer to diversify your investment, there is no starting threshold and it is not easy to hit the ceiling, your vision and vision are wider, and you can take care of it. It’s simpler and more worry-free, and there is a Mr. Market who sends money.

So, why is the advantage of buying stocks so obvious, so many investors still think that buying stocks can’t make money, but doing business can make money?

In the final analysis, this is not because people do not buy stocks with a business heart, but often stare at the stock price and market value every day, and use stocks as gambling chips! For these investors who “fry stocks” rather than “invest in stocks”, since buying stocks has become a gamble, how can gambling be better than doing a business on their own?

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