Yesterday, I met a friend in my office. And my friend’s friend was also there with us. While we were discussing about our profession, challenges and opportunities; he suddenly asked – So you people deal in finance, right? You then must have invested heavily in the stock market also? I replied – No, not exactly … Before I could say anything further, he quipped – Good, you should not. Because stock market is risky and nothing but a gamblers’ den. I replied – that see, driving is also risky. It is even riskier for my 5 year old daughter and certainly not so for me as I know how to drive. He did not argue further, but from his facial expression I made out that he was not convinced.

I was thinking about this futile conversation later also. Then I made a list of people whom I know very well and who have never invested in the stock market. When the list was ready I found a striking similarity there, that they have all actually invested in the market – mostly without even realizing that!

How?

Suppose your name also feature in that list. Here is a brief background of yours – You work in a reputed MNC at a senior position. You have been working in this organization for last 5 years. Four times in last five years you received a hefty hike in your salary. Before this you worked with a leading Indian conglomerate for 7 years.

Before going further, tell me now – Do youagree that you have already invested in stock of your current organization?

While changing job 5 years back you had choices before you – which company’s offer letter to accept or which interview to go for at the first place. Out of many job offers pouring in your inbox you decided to choose only a few among them. You needed a job then, but you also had your terms and conditions well set out. These are as follows:

• Company’s goodwill
• It being employee-friendly
• Good management
• Long-term growth prospect
• Incentives
• Its position among the peer
• How the company fared during last recession etc.

Once all your terms and conditions were met you were ready to go. So almost all your efforts can be summarized as below:

• You decided to join the current company finally and hence also committed to give the largest share of your day’s productive time to that company. Time is money. So this was a big investment of yours.
• You did your due diligence well before investing err joining.
• You checked your margin of safety before joining there.
• You made sure that the company’s management run the company well and with values and principles.
• You give a lot of importance to company’s profitability in future which is directly linked to your growth and prospect.
• Still this decision of yours is not completely risk-free. Agree?

If this is not stock investment – what else is? Want to see more similarities between choosing a job and investing in stock market? Here you go:

• So even if an ABC Company with no credentials offers you a great package, in most probability you will decide not to join there. Your view here is surely long term.
• Again when you search job you mention a few sectors only as your preferred ones. This means you will unlikely to venture into any sector where you do not have much knowledge. But over the years as your experience grows, you realize that you can do justice to many more sectors. So your circle of competence grows over time.
• If this investment decision of yours is turned out to be really good, then you are expected to get good incentives, year-end bonus and pay hike. Are not these similar to rights issue, dividend, and bonus shares (not necessarily in the same order)? Did I forget to mention ESOP as another fall-out?
• Your value of investment has also been appreciating in the process. Next time, may be after years, when you will look out for a new job after consistently giving good performance year after year in the current organization – other companies will definitely assign higher value to your candidature then. This is similar to your investment capital getting appreciated.
• When your company manages to bag new orders, expands to newer and lucrative horizons, acquires a good company or get itself acquired by a bigger and better company – you feel good. Feel vindicated in your choice.

This is what stock investment is all about. If you make informed choices and remain careful in handling your investments, you will get your effort’s worth. You will create wealth in long term. But you need to be as careful and serious as you are while looking for a job. If you are an entrepreneur or a businessman or a professional having your own practice, then the similarities are even more. There you know the things (checklist before investing in anything) from inside.

There are more checklist involved in buying stocks, than what we have discussed above. There are dissimilarities as well. Like, while buying stocks you should always look for a good bargain i.e. buy the stock when it is available at a good price.

Buying stock is like buying a business. How can you be casual then? Warren Buffettonce rightly said, “An investor should ordinarily hold a small piece of an outstanding business with the same tenacity that an owner would exhibit if he owned all of that business.”