Expert: Doug Ingram - 1/31/2003

Question
Dear Sir,
  This is a serious question; not trying to be cute. I was thinking the other day about investing in a business(s) as compared to investing in stocks or bonds.
  Let's say for example that I buy a bakery or do-nut shop,something that's cheap, very affordable, carrying a product everyone could use every day.
  If, after cost of start-up, I invested the same amount of money back into the business each month as I would put into a good mutual fund each month for a period of, let's say 10 years; might not something like a do-nut shop's earnings come out ahead of the stock market? I would just like to get some professional's opinions on this. Thanks for any advise! Sincerely, Mike Eidson.

Answer
Absolutely the best way to make money is to take a risk.
Buying a plot of land, a stock that takes off, or starting a business is the best way!

Buying bonds is safe!  Starting a business is very risky.  I think only 1 out of 5 make it past the first few years.

If it works, it's great.  If not, you lose everything.
Same with some stocks.

Bonds will protect your money for a nominal return.

You are right to think about something people need everyday.
The startup should also be less than a high dollar inventory venture.

I disagree that you would (should) be pouring money back into the business.  Either it works... or it doesn't.  Don't throw good money after bad.

Use a portion of the cash flow to buy stocks and bonds.
Or - to open another shop!

If you work for yourself, will you like your boss?  Do you have the skills?  You also have to make sure employees don't steal from you and you have to manage them.  

Be careful on choosing a good site, and don't eat up the profits!