Let’s compare stocks buying and setting up a business. Setting up a business and investing in paper assets like stocks shares and mutual funds are both easy. But, which is more profitable? Is it a business or a paper asset? Before we continue this topic, let us first analyze the advantages and disadvantages owning a business and owning shares in mutual funds or owning a company stocks. The advantage of owning a business is that a business can give you a potential high return on investments and you’re only the one to takes all the profits especially if it is a sole proprietorship type. Its disadvantage is that in a business you are the one who takes responsibility, you must work hard to make it work.
While on the other part, there are the paper assets. There are different kinds of paper assets. I know you are familiar with these. There are bonds, stocks shares, mutual funds shares, trust account certificates, etc. The advantage of the paper assets are as follows;See Also: Retirement Target Earning Asset for People Age 20s
1. Easy to invest
2. Easy to manage
3. Hassle – free types of investments
4. Don’t required lot of time and efforts
5. Easy income without doing anything
And a lot more advantage. While the disadvantage is that a paper asset is boring. You have to wait few months or years to realize gains or profits.
Should I Start My Own Business or Start Investing in Stocks?
In investing, business, equity mutual funds and stocks securities are both high risks types of investments. Here’s the example situation where in the two investors invest in business (entrepreneurial) and paper assets (stocks). They both invest $100,000, let’s see who makes the most profits.
Investor A. Set up a Business
Investor set up a business selling a food product. For every food product sold he will make $2. The investor’s capital per product is amounting to $8. The gross income is $10 and the net income is $2. Therefore, for every product sold, he will make a profit of 25%.
Investor B: Buy Stock Shares
The investor decided to invest in stock preferably blue chips. His stock portfolio is making 12-25% per annum. His $100,000 investment capital is making $12,000 – $25,000 per year.
Which is More Profitable?
Let simplified the question. Who can make the most money per year? If you are sensitive in the number game, you might answer a business is more profitable than stocks. You’re absolutely, right!
Rich people use the advantage of both. They set up a business, and once the business is stable, they will invest the profits from their business to stocks or other paper assets. Simply means, they want more passive income. FYI: Both paper assets and business enterprises can help you generate passive income. Do not forget they are both belongs to high risk types of investments.
Business Loans are Easy: Stocks? Maybe.
Banks tend to lend money to people for businesses purposes. Have you tried getting a loan from the bank and your reason is stock market investing. I think it’s not reasonable, maybe, or just pretend to use the loan in the business but the real purpose is for stocks. If you want to get rich fast, acquire a loan (preferably big amount) invest it carefully.
Loans rates usually ranging from 0.08% to 1.5% per month, or 9% per year. If your investments will earn for as low as 12%, therefore, you have profited 3% without using your own money. Can you do it? Do it with extra care! Stocks and business have both advantages to “leveraging”.
Final Answer: Should I Start My Own Business or Start Investing in Stocks?
Think 25% or More than that!
I don’t compute the possible earnings of $100,000 investment capital in a business. For you to analyze, just think 25% per product or 25% per year!
You don’t want to sell a single product per year if you are a business owner, of course, the more sales the more profits you can make. Why not join the discussions in this page and write your opinions about this topic. Let me hear your thoughts about this. Have a blessed financial journey!
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