What is better – investing in a business or the stock market?

I often write on Quora.com, where I am the most viewed writer on financial matters, with over 404.4 million views in recent years.

In the answers below I focused on the following topics and issues:

• What is better – investing in a business or the stock market?
• What are the risks of investing in the Russian stocks and bonds during the Ukraine-Russia crisis?
• By the age of 30 what were some of my accomplishments? Why shouldn’t we think success is linear and that we need to achieve certain things by certain ages?

If you want me to answer any questions on Quora or YouTube, or you are looking to invest, don’t hesitate to contact me, email (advice@adamfayed.com) or use WhatsApp.

Some of the links and videos referred to might only be available on the original answers. 

Source for all answers – Adam Fayed’s Quora page.

Which is a good stock market or business?

The stock market is just a collection of business – publicly-owned stocks which are owned by thousands or even millions of people like Apple or Amazon.

A private business is also a business, but usually has fewer owners, and isn’t traded on the stock market.

I presume you are comparing starting your own business to investing in the stock market.

Running your own business is more profitable if you succeed, but you have to factor in the following things:

1. It is much riskier. Most businesses fail as per the below information.

It is possible to reduce the risk by having experience in the domain, and of course, most established businesses (even small established businesses) aren’t afraid of bankruptcy.

This doesn’t factor in some extra risks such as:

• Liquidity. Even if you are in an industry where you are getting incredible returns, you might not be able to sell as easily as public stocks. Let’s say you are a hotel group that has identified somewhere to buy for $10m. You turn it around, and it makes $5m in profits per year. That is a great investment. You will get your principal returned in two years, and maybe have an income for life, if you play your cards right, but it isn’t easy to find a buyer quickly.
• Relying on others. If you are making millions on Youtube, they can ban you. If your business is making loads of money from ads online, you could get your account restricted. You might be required to get new licenses to operate, due to government rules. In other words, private businesses are often on “rented real estate”. In comparison, if you own your private stocks, fewer things can go wrong if you are long-term.
• A private, smaller, business, often relies on the founder’s health.

2. Time

If you factor in time to return on investment calculations, some private business investments are less profitable than expected.

By investing in something like stock market ETFs, you often can do it without much hassle.

3. Portability.

These days, you can live almost anywhere in the world with a stock or ETF account, and it won’t affect your performance.

That also means you can easily change your residency, and pay fewer taxes in many cases, which is what many retirees do.

It is now easier than ever to have a portable, online, business, where you have clients all around the world.

There are still plenty of industries that don’t have that option, and you are therefore more restricted and are risking everything on one country’s economy.

I am not saying private investments are bad. I have reinvested back a lot of money into my own business, including buying out somebody else.

The point is, that you should ideally do both if you want to create your own business. Have private investments which are more liquid in case something happens to your health, or there is any number of unexpected events.

What are the risks of investing in the Russian stocks and bonds during the Ukraine-Russia crisis?

Many people assume the biggest risk is a falling market like we saw in the early stages of the crisis:

That is certainly one risk because the adage that “the market always comes back” is mainly true for the US, the world index (MSCI World), and most major economies.

It isn’t always true for war-torn or sanctioned countries. The Venezuelan or Iranian stock markets might never hit record highs in USD terms in our lifetime.

Russia isn’t Iran or Venezuela, but the same risk still applies.

Beyond that we have to remember:

• With individual stocks, you have the added risk that sanctions ensure the company could go to zero more easily than before
• The Russian Rubble is likely to be highly volatile, given the measures to shore it up from the Russian side and weaken it by some other countries
• If the sanctions and economic warfare get worse, Russia could confiscate property, including stocks, in retaliation for Western (and indeed largely global) sanctions
• Perhaps most importantly of all, most brokerages stopped accepting orders for Russian stocks and ETFs, so selling and buying have became more difficult anyway. So, you might be left with an asset you can’t sell, especially if the situation escalates.

By the same token, the war could be over, sanctions relaxed, and the stock market recovers rapidly.

We just don’t know. Best to not speculate, and just base decisions on the facts available at this time, which is that the Russian and Ukrainian markets are too risky for the average investor.

Let’s not forget as well that many investors will already have a small amount of indirect exposure to Russia, as Russia is in the MSCI World and Emerging Markets index, and some firms in the S&P500 still do limited amounts of business in that region.https://www.msci.com/eqb/pressreleases/archive/PR_Russia_Classification.pdf

The article above shows this issue is slowly changing though.

By the age of 30 what were some of your accomplishments?

I will take a different approach to some of the answers below…..but I will still answer the question of course!

It is a great question because it gets to the heart of one of the biggest misconceptions about success – and that is that success is linear.

Or at least if you haven’t achieved X and Y by age 25, 30, or 40, you are a failure. Life isn’t always that simple.

Colonel Sanders created one of the most recognizable brands in the world in KFC, and he was broke at 65:

Buffett has been one of the wealthiest people for a long time now but didn’t make his first billion until his 50s.

These might be extreme cases, but I can see the same thing in my network. Many people peak too soon.

I remember meeting one high-flyer who was running his own business and making 500k after-tax in East Asia at 26–27.

By his early 30s, he was broke and starting again. He probably got too complacent and took too many risks, whereas his risk-taking was calculated at the beginning.

I know another man who made his first million by 32, had a great period but then over-leveraged and went bust at 52 due to the credit crisis which followed Lehman’s collapse (he was in property development).

I also know countless people who got a great job out of university, but then seemed to burn out by 30, and start again or have a mid-life crisis after 40.

So to answer your question, I was pretty lost at 24 or 25 but created my own successful business and brand by 30, which become one of the fastest-growing firms in its niche of ex-pat investing, which is easy to see if you do a basic Google search.

This quote says it all:

You shouldn’t get complacent if you have made millions by 30, and nor should you be despondent if you are struggling.

Often one or two changes will result in a momentum swift that can change your life for the good or bad.

The important thing is just to take action to achieve what you are looking for in life.