As from April 2013 my Journey in Investing is to create Retirement Income for Life till 85 years old in 2041 for two persons over market cycles of Bull and Bear.

Since 2017 after retiring from full-time job as employee; I am moving towards Investing Nirvana - Freehold Investment Income for Life investing strategy where 100% of investment income from portfolio investment is cashed out to support household expenses i.e. not a single cent of re-investing!

Currently; it about 54% to destination!

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This blog is authored by an old multi-bagger blue chips stock picker uncle from HDB heartland!

"The market is not your mother. It consists of tough men and women who look for ways to take money away from you instead of pouring milk into your mouth." - Dr. Alexander Elder

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Sunday, 11 October 2009

Is Investing In Real-world Business Safer Than Stocks?

After this shocking market crash in 2008, some investors may think that investing in the stock market is far too risky, and they are not sure how to deal with this uncertainty of market shocks going forward?

They may be thinking that they may be better off in investing in real-world business producing real assets in the areas that they are familiar with or interested in; and getting their investment returns from the real-world business.

Let me share my thinking because I too have been thinking about it in my earlier days for many moons.

Unless you have the entrepreneurship spirit in your blood and you need to fulfill your dream and reach the Self-actualization stage in Maslow's hierarchy of needs. I said: "GO FOR YOUR DREAM!"
But, it is just about investment returns from pure financial reasons, then you are taking more risks than expected.
Investing in stock market is likely to be exposed to two risks - market risk and stock risk and these risks can be mitigated through proper portfolio risk management and control.
You just need to acquire the relevant knowledge and skills to manage your risks.
One clear advantage in investing in the stock market if you treat it seriously as your business entity is that there is virtually zero fixed cost overhead.

But, investing in the real-world business, there is fixed and variable costs overhead, and in bad times your fixed costs overhead is going to kill you earlier than expected.

In running a real-world business, there are just too many risks to manage and control, and list out some of common risks associated with running a business:

1. Operation Execution Risk
2. Sales Risks
3. Pricing Risks - under-pricing or over-pricing
3. Supplier Risk
4. Customer Risk
5. Cashflow Risk
6. Refinancing Risk
7. Competitors Risk
8. Market Risk
9. Staff Risk
10. Fraud Risk

So do you still see investing in stocks is far riskier than investing in the real-world business?

I said again, unless you have the entrepreneurship spirit in your blood and you need to fulfill your dream and reach the Self-actualization stage in Maslow's hierarchy of needs. Then I said: "GO FOR YOUR DREAM!"

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