Personal investment vs. Starting a business

While listening to a talk by Sukan Makmuri on Financial Management for Entrepreneurs (covered stuff like investing in stocks and real estate, this talk was co-organized by NUSEA and Stanford ATI), what I realized is that while it is all’s good to know what are the possible options through which one can start creating wealth for oneself, lots of research and effort needs to be done so that one is well versed with the industry and knows exactly what (s)he is doing. (Of course you say, who expects money to drop from the sky?) Alternatively, you can dispense with all that and just hire a financial advisor. But hey what are these financial advisors doing still working to earn their keep? If they are so good at managing and growing money, why aren’t they filthy rich now? I have no idea, but perhaps I should give them the benefit of the doubt and that they growing their own money as well but just somehow want to give advice to others.

But time is limited, no? How can we find the time to devote to our business and yet research for personal investment vehicles like stocks and real estate? I think this question is particularly pertinent to young adults who might not yet have chanced upon a great idea, great technology or a great team to work with for the startup but are itching to be on their way to making some headway into creating wealth for themselves. Where else to start by looking at personal investment options? But if one were to start going down that personal investment road, I feel that to reasonably succeed in it, significant amount of time and effort needs to be expended. And to me, that is taking time away from starting a business. Because to me, starting a business is not just simply getting together an idea, a plan and people to work together. Rather, time is needed to cultivate skills to be a successful entrepreneur. This might include brushing up on one’s presentation skills, or building relationships and a network of contacts, or simply doing research and development in a particular technology. How then do we choose how to divide our time?

I would think that the percentage by which we allocate our time to the different efforts would vary from person to person and more importantly, the person’s analysis of the risks involved and self-evaluation as to which path (s)he might be better suited for. While the argument goes that everything can be learnt, and people like Warren Buffet and Steve Jobs are not born, but made. If the need arises where one has to choose one’s poison, proper self-evaluation and risk analysis should be taken to decide which path one should go down. Some might choose to devote 100% of their time into either personal investments, or keep starting up businesses; others will choose to put their eggs into different baskets.

One of the main differences between the two options is that personal investment would more likely draw a passive income as opposed to the huge risk and low pay (or none at all) but with a huge payoff at the end for a startup. Both have their appeal. Thus, a pro of doing personal investments as well as spending time in a startup could be that the former might yield passive income for the person, giving him a sense of security that his stocks are gradually giving him higher returns than what the bank can. While he is more free to indulge in the adrenaline rush of being in a startup.

In summary:

(1) 100% of time into personal investment would probably yield more passive income, but nothing like a huge windfall (unless that person managed to buy stocks in a Google long before its potential was seen by the masses)
(2) 100% of time into a startup leads to hope of a huge windfall after slogging for 5 years.
(3) Division of time into both personal investment and being in a startup might give the best of both worlds, but might also mean less quality in each.

You choose.

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