MARKET CAPITALISATION : LESSONS FOR LIFE

 Market Value

Market capitalisation is the total value of the company’s outstanding shares. While ‘face value’ is the value at which the share was originally floated, share value, is perception and supply-demand driven. Trust and expectations of the shareholders dictate perceived worth. Better the perception, more demand against finite availability which increases price and market cap. Often detached from fundamentals and sometimes devoid of rationale, share market has its own dynamics. Prices could fluctuate for no valid reasons. Experts explain it away as ‘sentiments”.

Sentiments and fluctuations apart, the factors that determine market cap are ‘number of outstanding shares’ and individual ‘share value’. Companies could also own shares other than outstanding shares.  These are called treasury shares Treasury shares could be those which the company reserved for itself or bought back or even those which remained unsubscribed. As long as they remain treasury shares, these neither influence market cap nor fetch any rights.

Human Worth

Each human being carries both outstanding and treasury shares. Competencies and attitude endowed to us at birth constitute our face value. What we do with it and how well we nourish it dictates our share value. The number of people to whom we become relevant and the manner of our relevance determines our market cap. The more we keep our skills for ourselves increases our treasury shares. How much others want of us defines the supply - demand dynamics. The sum total of our individual life depends on what we willingly shared with and how many. The more relevant we are to the society the more intrinsically valuable we become. Higher our market cap, higher our life’s net-worth.

But there is a difference!

The Difference

Business entities hope to continue in perpetuity, theoretically giving themselves a never-ending time continuum whereas we are up against a receding time line.  Conditioned to be unaware of how distant we are from the terminus, we grow oblivious to the obvious. We ignore the truth of our incremental progress to the end though a review of how long we have traversed could be an easy estimate of how close we are to the finish line. An honest evaluation could trigger conversion of the uselessly-held treasury shares into high yielding outstanding ones.

Value Addition

Irrespective of the company to which the share belongs, it’s the probability of ROI that draws investors to a share. The fundamentals, the management, the proposed market segment etc are significant in estimating the expected ROI. It essentially defines the strength of a share. Each individual, likewise is also endowed with a unique set of qualities. Much like increasing share value by increasing assets, perpetual efforts to upgrade competencies enhance our net worth.

Yet, intellectual accomplishments of an individual remain end states of mindful pursuits, bank balances result of considered choices or self-inflicted denials and health genetic gift or outcome of a random probability of encountering pathogens not potent enough. Health, wealth and power accrue sense of achievement that one son gets accustomed to. All these only enhance face value and not share value.

To yield returns we have to be subscribed by others else we remain overvalued treasury shares. It is to increase the probability of being subscribed, that we are innately made abundant in the ability to love and filled with craving to be loved.

Transformation from face value into share value can happen only by deploying one’s capabilities for the good of the society. In deploying our skills for others, we extend our area of influence, essentially increasing the share base and thereby our societal value. Better the asset deployed, more coverage and easier approachability, higher becomes the relevance and demand, resulting in exponential rise in value.

Compounding Returns

Investors choose shares with much care. The Creator isn’t any different. We are unique shares in which creator has invested. Unlike commercial shares, Creator has made us autonomous shares empowered to decide how much should be our treasury component and how much outstanding. The decision becomes urgent in light of receding time lines.

Experts recommend staying invested long enough to compound and reap returns for outperforming ones will eventually more than compensate the bad ones. In our own life too, we need to stay invested long enough to reap returns on relationships, trust and compassion.

Bulls Will Run Again

The market has its bulls and bears, life its ups and downs, persistence the key to profitability.

The fickle hearted quits at the sight of a bear, missing out opportunities. Wizards, survive bear hugs playing dead and exploit bear runs through diversification and consolidations. They enlarge their gains in bull runs through clever disposals.

Life too has its bulls and bears to content with. Life's bull run must be exploited to reach out to others and increase capitalization while bear hugs must encourage perseverance to remain invested in the value systems that we have built up over time, for much like the market, bulls will run again.

Investment Advice

Entering or refraining from the share market is a deliberate choice. But, by the accident of birth, we are invested in. We have the option to ‘exist’ as treasury shares with the face value endowed to us at birth or live invested as outstanding shares enhancing value through competency building and sharing.

The young may postpone the deliberation on the pretext of toiling to live while the not so young avoid it citing inadequate time for investment to mature. There is nothing more for detached from truth. Not attempting to diversify interests, increase one’s competencies and reaching out to others is nothing but condemning oneself to an existence awaiting death.

If we can pride ourselves in our choice of shares, can the creator be denied his wisdom?

 It’s all Within

There is something interesting about human mind. Invisible yet visibly influential, silent yet its diktats loud, shapeless yet shapes the very existence of its host, mind is powerful enough to determine the very path man.[1]

Time lines are not ours to reckon with but our commitment is. It’s time to look forward, pick up threads and set ourselves to increasing our market cap.

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[1] Discovering the Mahatma within, jacobshorizon.blogspot.com