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More Risky: Small Business Owner or Trader
- Thread starter lpchad
- Start date
Quote from Stosh:
I've done both. Made a living for over 30 years owning a small construction business.....did stock investing as hobby. Retired now.......started trading full time a year ago....great timing, but hanging in.
Answering your question: In my business, I often did dumb things but was able to overcome them by working much harder. I think you probably have to be smarter to be a successful trader......but I love not having to deal directly with the human race all day long. Stosh
I hear ya. Same here (not too much construction though). I can deal with the human race on my own terms now. Buy a paper or get a haircut whatever.
I have small cabin in the woods I'm rebuilding and when I get the ambition I go there bang a few nails and saw a few boards.
In business, you can take a job and it is a sure thing, no such animal in the market and when you do find them, tough holding on.
Trading itself isn't a business
I own a "trading business" and a REAL business...
One provides a service to a demand, or a need. Trading is merely a boxing match. Yes boxing can be a business, betting on the winner. . .
And trading can be approached in the SAME WAY as a business (which it should) but it's not a business itself.
It's almost like martial arts or some other competition.
I own a "trading business" and a REAL business...
One provides a service to a demand, or a need. Trading is merely a boxing match. Yes boxing can be a business, betting on the winner. . .
And trading can be approached in the SAME WAY as a business (which it should) but it's not a business itself.
It's almost like martial arts or some other competition.
The goal of the traditional business man is to avoid and survive while experiencing un-priced changes in the marketplace (for example, the value of a fully depreciated asset, or piece of manufacturing equipment which is 50 years old, but one which still has a priced and marketable productivity). His greatest profit will be from separating priced and un-priced vehicles of value to his greatest advantage.
In the trading universe, everything gets priced, except the unknown (i guess you derivative guys could say that the vols. are a guess at future unknown). So instead of trying to make money from the non transacted up-priced value, we traders try to make money from the priced, immediately resolved value and the face that this can change fluidly.
In the trading universe, everything gets priced, except the unknown (i guess you derivative guys could say that the vols. are a guess at future unknown). So instead of trying to make money from the non transacted up-priced value, we traders try to make money from the priced, immediately resolved value and the face that this can change fluidly.
Quote from daveb351:
In the last 45 yrs I've owned a warehouse, have also done manufacturing, contracting, publishing, farming and the last 10yrs trading. By far, trading is the best...and least risky.
Agree. Starting and operating anything but a turn-key franchise is hard work. And the returns? Modest.
T
The biggest problem for just about every small business is volume. You can have the best product or service in the world, but you'll always fight market size. Even large firms fight their market size, drug companies can't make more people have AIDS, for instance.
The markets liquidity is its most exciting feature, and as that nut from Omaha argued, it's compounding which is our greatest ally.
The markets liquidity is its most exciting feature, and as that nut from Omaha argued, it's compounding which is our greatest ally.
Quote from lpchad:
On the heels of my last thread, it was suggested that being a small business owner is more risky than trading.
Let's have some discussion on this.
Your intuition is correct.
If you define risk in terms of exogenous variables - in other words, things you CANNOT control, then a small business owner is much more risky.
The reason is because a small business is highly affected by the overall economy which you have no control over. You can run a great restaurant but if the economy is in a recession, as it is now, your revenue will fall.
Now of course you can come up with innovative ways to reduce costs, but overall your bottom line will suffer.
Trading really does not have any exogenous variables - there is nothing that is out of your control. You decide when to enter, when to exit, how many contracts to trade, etc.
Of course the downside of trading is that there are a lot more endogenous variables (internal variables that you have to deal with) to worry about and consider, which makes finding a TRUE edge (an edge that will never go away), a bit more difficult.