1. Will you buy a $100 lottery ticket and hope to win $100 million prize, or 2. Will you buy a $100 lottery ticket and hope to win $50 million prize, and a guaranteed return of $50
Successful small businesses are better than successful trading operations. The reason: recurring cashflow. A business that makes a dollar today is likely to make a dollar tomorrow. A trading business that makes a dollar today could easily lose a dollar tomorrow. This means that that more successful you are in building your coffee shop (ie put it near a commuter train station or have a good recipe or whatever) the more likely you will be successful next year as well. Trading is not like that. Earnings today may be earnings next year or losses next year. This is why financial companies have PE's like (GS, 15), (JPM, 10), (MS, 9) and operating companies have PE's like (PG, 17), (sbux 24), (ge, 15)
Trading is a small business and small businesses have a 90% failure rate. Look for my post on the following page as to why both fail: http://www.elitetrader.com/vb/showt...l+Business+Administration+failure#post3187474 I have run a computer retail business and a trading business and both are just as hard.
Any business w/ unlimited upside is not only attractive, but also difficult to achieve. So why trading or another business? Depends on the person's desire, knowledge, etc etc. When I tell people that I trade for a living, many reply with - you can really do that? So that would tell me that most probably don't even know trading for a living is an option, but very easy to see that Subway, McD's, etc. is a business that people know and you can franchise.
They both are very hard. I agree. They have different advantages and disadvantages but the failure rates are high and comparable. I'm just saying that the relatively higher stability of earnings makes taking 100k and buying a coffee shop a better trade than trading spu's on some technical model.
Debaser, you are correct. I'm on that camp as well. Most people fail at business management and they would be financially better off if they put their savings in a diversified basket of stocks instead of opening a business. The reason they do it though is because people tend to be blind to odds and mathematical expectation, they just know they can strike big if it works out so they try. There is probably an overestimation of their own skills and chances also(They know most business fail but somehow they don't think that will apply to them) There is an upside to doing so however, putting your money in a brokerage account to do 1 trade and nothing all day is surely boring as fuck, opening a business is quite a challenge and gives you a 'mission', you only live once so might as well live fully
I understand what you are saying. But, using ââ¦coffee shopâ¦â was not a good example. I sold computers to people in that industry and went to their food shows. All I ever heard from other vendors was ââ¦sell it to them quick. Most restaurants donât make it through the first year. People are too picky about food. That is why 98% of them failâ¦â trading seems to be doing better at 95%.
done both, trading is better then most small biz, where else can u work from 930-11 and bag a couple hundys, most small biz have some sort of theft, employees no shows, competion, rain days snow days, 100 degree days, slow time of day, if you want to work 60-70 hours open the doors, sell out , then calculate ur hours on all the planning and work that went into it, and see how much money u really lost, or make that 12.50 an hour, here's a tip Home Depot is hiring.
There's no general answer to this -- it is completely case-specific. Would Jim Simons have been more successful opening a coffee shop than he has been at trading? On the other hand, I think that the vast majority of the millions of successful small business owners in the US have enjoyed far greater success at that than they would have at trading of any kind.