Mike Andes (speaker/creator) discusses investing $10,000 and contrasts small-business investments with large-cap assets (Fortune 500 companies, S&P 500, Dow Jones). He warns that small businesses carry higher risk including possible total loss, but potentially higher returns if they succeed; by contrast, major indices are portrayed as relatively more stable and unlikely to collapse in the short term.
The boogeyman in the room though is the fact that so many small businesses do fail. And number one reason why people would invest in an asset that returns less stability, right? Do I believe that Fortune 500 companies and the S&P 500 and the Dow Jones are all going to collapse and go to zero within the next month or two? Very unlikely. When it comes to small business, you can absolutely have a complete wipeout. The reason for that is because there is more risk. However, with risk comes more reward. The more risky the asset, the greater the return is if everything goes well.
