AUTHOR: SS | 22nd May 2021 | Read Time: 4-6 mins
Imagine an individual belonging to a business family—-there are so many of you in this situation.
Now this person is brought up in the best possible manner…great education, strong values inculcated……
Now when he/she is to get into work:
Alt 1–
One may want to set up their own business…or let’s call it a StartUp…
Alt 2–
One may want to use their skills & knowledge and become a Portfolio Manager
How does one decide which path to choose?
Well I thought lets dig deeper and I’ll share my insights about both the options.
Ps: Let this one be in Hinglish…makes a lighter and informal read….
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What is the difference between becoming a business owner versus becoming an investment manager?
If you become a business owner, how do you go about it? You actually identify some solid opportunity. That ye area hai jis mein bahut scope hai, bahut scalability, it is untapped. Then you build up a Management team–resources that you require for the purpose of fructifying that opportunity. Uske baad you scale it up, you gain control over it. The problem is that it has a very difficult exit–usko exit karna bahut difficult hai. Imagine that if you have a 100% percent ownership in a company and when you grow old you want to come out of it? It becomes difficult to exit.
On the other hand, when you become an Investment Manager, you look at different businesses that are out there, just like you would like to do those businesses. Unme se jo businesses aap khud karna chahte, yani un business mein potential hai apke parameters ke anusaar–un businesses mein untapped potential hai…opportunities hai. And vo jo business hai, us business mein apko dekhna padega ki management kaun sa hai company mein—mgt mein kya vo qualities hai jaisa mgt aap khudka set karna chahte the– does the management has that quality, the integrity, the efficiency, the long-term vision?
And then you see what are the valuations that the company is commanding. If all of these 3 conditions are satisfied, that is : the business has huge potential, the management is good/solid, and valuations are either fair or there is undervaluation. In that case, you take a long-term bet on that particular investment. And there are many such investments in your portfolio. Now you have a very easy exit—exit karna bahut easy hai– You have liquidity, but you don’t have control.
So young financial students– they should, when they decide upon whether I should become a businessman or I should become an investment manager, understand the difference that lies in becoming a businessman vs becoming an investment manager.
A businessman will be able to do max one, two or three businesses and have complete control but difficult exit. While an investment manager would be able to invest in multiple businesses where he would not have control, but he would have exit. And there will be diversification.
I personally look at companies as a vehicle for the purpose of our exposure to different businesses that we cannot do ourselves and Portfolio/Investment Managers are supposed to be specialist in this regard.
ENDING THOUGHTS:
So what is it that gets you going? If building something from scratch…watch it grow & growing with it…being a one-man-army is your idea of excitement–then become an entrepreneur. If being a specialist…with an eye for numbers & fundamentals & valuations….a nag for markets & everything finance—if these excite you, then take the path to becoming an Investment Management professional.
Both the routes have their own pros & cons…..no decision is right or wrong as long as it’s based on logic & backed by adequate research–meaning your career decision should not be purely based on what the masses are doing or what’s trending.
Your decision got to be based on a combination of factors—what are your aspirations…how you see yourself 7-10 years down the line….is there logic & research behind your career decision…do you feel passionate about it….and what are you going to do to acquire the requisite skills for your chosen path?
And last but not the least—-I personally believe that using one’s instincts is also an important factor. By instincts, I don’t mean that be impulsive while taking a long term decision—no. I mean develop the art of being able to listen to that voice deep inside of you!
CHOOSE YOUR PATH…MAKE AN INFORMED DECISION….
Regards
SANJAY SARAF SIR
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Very truly said sir.