Today’s consumerism teaches us to spend, spend, and spend. However, you have your hard-earned money and you want to make more of it, instead of just going on a mindless spending spree. Your entrepreneurial spirit is wide awake, looking for ways to invest further, and create something. And there are two paths you can choose to follow – start investing in stocks (via the Internet) or launch your own business.
Now, both of these paths seem exciting, which is why you’re unable to decide which road to take. You can invest through online trading and see your stocks go up, which makes online traders feel almost invincible. But if they sink, you can lose a large piece of your investments overnight. On the other hand, it takes some time to get a business off the ground, but it is something that can last longer, is more stable, and puts you in charge of financial, creative, and other kinds of decisions. Let’s take a look at the pros and cons of online trading and starting a business.
Online Trading
There are always risks, whether you trade offline or online, so if you want to invest, fear of investing is something you should get rid of. Unlike traditional brokerage (brick-and-mortar) firms, online trading comes with much lower fees. Stockbroker commissions are lower, which allows you to both earn and save more.
Another advantage of online trading is the ability to make faster trade executions (almost real-time). When you trade stocks, time is often essential, and with online trading you can initiate a trade with a simple call or email. There is also the possibility to monitor your investments in real time, because many online trading platforms offer access to streaming data, including trade information and stock quotes. This makes it easier for you to see how your investments are doing at any given moment.
There are different types of online trading you can choose from, such as position trading, day trading, swing trading, and scalping. One of the most popular ways to start online trading is getting involved in forex trading due to its easy accessibility, high liquidity, potential for fast returns, and around-the-clock schedule. Forex stands for Foreign Exchange – the exchange of one currency for another.
As for the downsides of online trading, there are some common traps you can fall into. All you need to do to invest is push a few buttons, which means that the easiness of it increases the risk of overinvesting or making investment mistakes. You’re on your own, because there are no brokers to help you navigate through the stock market waters. Ultimately, you’re Internet-dependent, and if your Internet connection gets interrupted at the wrong time, for whatever reason, you can lose out on an important trade.
Starting a Business
As a business owner, you’re the one in charge. In online trading, you can analyze all the financial metrics, such as cash flows and balance sheets, but eventually your performance depends on factors that are beyond your control. In the business world, market conditions are also out of your control, but you can re-adjust your strategies to account for them.
When launching a business, you don’t need a lot of money to make more of it, because you have a chance to start an online business with no more than few hundred dollars and then grow it gradually. There’s no need to risk any money upfront, and you can turn a small investment into something much bigger. Also, tax benefits are much greater than those of online trading. You can tax various tax deductions on almost any business-related expense you incur. Also, if you register your company as an LLC (limited liability company), there are other creative ways you can save on taxes.
However, the stats tell us that about half of businesses survive the first 4 years, and the failure rate goes higher as the time passes. Only 10% survive long enough to reach the 7-year mark. If you want to start a business that can potentially bring you a 100k per year, multiply this potential revenue by 10%, and you’ll get the expected value of your business (a simplified calculation). Your expected value is 10k, and if it won’t cost you 10k to launch a business, then you should consider launching it.
In the end, everything depends on your preferences, the amount of work and creativity you want to put in, and the energy that pushes you forward. Do you see yourself as a business owner or a stock investor? Do you want to work with other people (vendors, suppliers, customers, employees) or you feel more comfortable working alone in front of your computer screen? Whatever you choose to do, don’t fear the risks, because they’ll always be there.
