I was at a book talk at Kinokuniya just 2 weekends back and there was an interesting question posed by the audience which I would like to share with all of us here for discussion as well as to share my opinion. The question was something like this (paraphrased), “In investing, for you to win, someone must lose. Isn’t it difficult to win all the time and is it really ethical?”
Personally, this question brought me back to the times when I first started learning about the stock trading. Trainers and books taught me that stock trading is a zero sum game. For me to win, someone must lose. Some even state that it is a minus sum game because when we add in commission, both side can end up losing and only the brokerage win. To me, it was really a tiring way to invest, fun but tiring and worse thing is that it is not very profitable for me.
I want to share that if you are holding onto the idea that investing is a zero sum game, you may be investing from a incorrect perspectve and this may be affecting your investment results. Many people enter the market with the idea of buying low and selling high. This is not nvesting, this is trading and hoping someone pays a higher price than you did. When we invest correctly, everyone can win and should win. Follow me on this.
I replied my audience’s question with an example, “What are we doing when we are investing? We are making everyone win and in the process we win as well. Take the example of Kinokuniya. Lets say it is a profitable business because it provides good value and experience to the customers. And because they want to expand, i am invited to invest in them so they can use my money to open any branch. When the new branch starts, it provides great value and the customers patronize it. So in return, they make money and I, as an investor gets profits.
My question is this: Who WINs?
The Answer: EVERYONE
The customers win by being able to buy books and have nice experience.
Kinokuniya wins by making profits.
The investor wins because I earn profits from my investment.
This is how investing should be! Of course, as investors, we have to be wise and invest in businesses that we have assessed and judge to be
1) Providing value to the society
2) And because they provide value and have good systems and management, it is going to be profitable.
This is how investment should be and this is why we become profitable when we invest from business perspective in the stock market. Everyone wins!
In the future, as the business builds up its value, I can choose to sell it at a higher price to another investor who fancy this business. NAd that investor can continue to ride on Kinokuniya’s profits and continue to win.
When does stocks investing becomes a zero-sum game?
I believe it becomes such a condition when we hold a very short term perspective and trade it in split seconds, hoping someone esle pays a higher price than us.
This is my perspective and this has helped me become consistently profitable.
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Mind Kinesis Research Team