The impact of market fluctuations upon the investor’s true situation may be considered also from the standpoint of the shareholder as the part owner of various businesses.
The holder of marketable shares actually has a double status, and with it the privilege of taking advantage of either at his choice.
1. On the one hand his position is analogous to that of a minority shareholder or silent partner in a private business.
- Here his results are entirely dependent on the profits of the enterprise or on a change in the underlying value of its assets.
- He would usually determine the value of such a private-business interest by calculating his share of the net worth as shown in the most recent balance sheet.
2. On the other hand, the common-stock investor holds a piece of paper, an engraved stock certificate.
- This stock certificate can be sold in a matter of minutes at a price which varies from moment to moment—when the market is open, that is—and often is far removed from the balance sheet value.