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The “Market” or the Businesses


What are you really investing in? The “market” or the companies that are traded in that market?

Let's start with the basic premise that the huge majority of buyers for investment do so with the intention (wish? or hope?) of making a profit. But an argument can be made that there is a big difference between making a profit and taking the profit…that is selling out by converting your investment back to cash.

There is a very old saying that you won’t go broke making lots of small profits.

If you bought a share for $5 and sold it for $10 no one would argue that you hadn’t made a profit, except the bloke who then saw his share go up to $20 after he’d sold it for $10. For the next umpteen years he would tell all his mates that he had lost $10 a share on the deal.

Some years ago BHP advertised using a female actress who, in various parts of Australia was trying out the parts of her company that she owned – trains, mines, railway tracks, factories, etc.

The piece of paper that says you own 100 shares in a mining company effectively means that it is your chunk of iron ore that is being sold to China so that you can profit from the sale.

But don’t get too close to the smelter!