How to be a stakeholder, not a trader

[pull_quote_left]Don’t pledge your house or use all your savings to be a business owner. A Rs 5,000 investment will suffice[/pull_quote_left]

Many of us dream of starting our own business, but only a few actually go ahead and do it. Entrepreneurship means moving away from the comfort of a salaried job and pouring your life savings into your dream project. If you haven’t saved enough, you might even have to pledge your house and other assets to raise funds for the business. Most of us are either too scared about taking that risk or just don’t have the required resources.

Now comes the interesting part.There are companies in India that help you start a business with as little as `5,000. When you invest in an equity mutual fund, you become part owner of the businesses it invests in. True, your stake in the companies in the fund’s portfolio may be minuscule, but you are a shareholder all the same. If you invest more, when you have more money, your stake in these ventures will increase. At a very basic level, an SIP is nothing but a creeping acquisition of a basket of companies by an individual investor.

Mutual funds make it easy for you to become a businessperson. It can take years and thousands of crores of rupees to set up an oil refinery, a power project or an auto manufacturing facility. You have to go through a maze of regulatory clearances before you can set up a bank, a telecom company or an insurance firm. You also don’t have to wait for a gestation period before a business starts churning profits.Your money is invested in up and running companies, most of which are profitable and successful. Besides, closing down a business or selling it off is not easy. Even if policy changes or market conditions are not favorable, the legal procedures of winding up a business can take months if not years.

traderIn a mutual fund, a minimum investment of `5,000 makes you a part owner of a diverse set of businesses. And you can increase your investment, reduce your stake or completely exit with the click of a mouse. What’s more, you don’t have to pay any tax on the gains if you hold on to your investment for just one year.

Indian stock investors need a change in attitude. They should stop being traders and instead see themselves as part owners of the businesses they invest in. If you start a business venture, will you wind up the business within 8-10 months? Then why do you think of selling off your stocks and equity funds so soon? Indian investors were 45% owners of Indian equity in the early 1990s. Today, they own barely 8%. While the market cap of Indian companies has soared, the Indian public has just sold off its stake.

There are lots of Indian companies run by excellent entrepreneurs and managers. These people work hard, but the fruits of their hard work are enjoyed more by investors from Singapore, Hong Kong, London and New York than from Ahmedabad, Bengaluru, Mumbai and Delhi. Indian companies are progressing but Indian inves tors are still in reverse track. If Indian investors had not sold off, many of the blue-chip companies in this country would still be owned by Indians.

Source: TOI 05 Oct’2015