The Value of Being an Owner

On February 22, 2009, two weeks before the Stock Market bottomed, I made the audacious decision to leave a large wire house and open my own wealth management business.

Making a change from employee to business owner at such an unpredictable time in the market was daunting- to say the least.

Nevertheless, I knew that my goal of creating a legacy of long-term wealth for my family required me to make that challenging decision. So, in early 2009 I made the decision to give up the security of a comfortable job with comfortable benefits to open my own business.

Thirteen years later I can say that the commitment to start my own wealth management company, though not without challenges, has been prosperous and I am so glad did it.

Lately the financial press and investor sentiment headlines have seemed to be increasingly pessimistic. With Equity (Stock) markets falling in values, many fearful investors wander why they should even own equities (stocks) in the first place.

With the S&P 500 officially entering a bear market (A Bear market in stocks is a declining market that has fallen 20% or more from a recent high for a sustained period-of-time), it is now wonder why investors would second guess their investments.

This recent volatility reminds me of the valuable lesson that I learned earlier in my career.

When we as Investors choose to own stocks, (not unlike my decision move from employee to business owner) we collectively take an ownership position in a corporation. (As reminder, a stock represents the ownership of a fraction of a corporation, this entitles the owner of the stock to a proportion of the corporation’s asset said profits over time as well as assuming the risk that profits of the business are not guaranteed).

I wholeheartedly believe that being an owner in Stocks (Companies) will continue to bear fruits over the long run. The world, over time, will improve, will grow, and will become a better and more efficient place to live.

Warren Buffet, American businessman and philanthropist and widely considered the most successful investor of the 20th century said: “American GDP per capita is now about $56,000. In real terms – that’s a staggering six times the amount in 1930, the year I was born, a leap far beyond the wildest dreams of my parents or their contemporaries.” Mr. Buffet went on to say; “U.S. citizens are not intrinsically more intelligent today, nor do they work harder than did Americans in 1930. Rather, they work far more efficiently and thereby produce far more. This all-powerful trend is certain to continue America’s economic magic remains alive and well."

In the end, healthy economies grow, and markets generally move up over long periods. If greed were investors’ worst enemy at the top of a market, fear is their worst enemy when markets are challenged.

Focusing too intently on the when and why Stock markets go down carries risk. During challenging conditions, people seem to forget that economic cycles are just that—cyclical. And that cycles have their ups and their downs. The winner in either environment will be the clear-eyed investor who considers the long-term fundamentals and invests with conviction in themes that can deliver attractive risk-adjusted returns.