I was having this remarkable conversation recently about risk and returns with a college of mine and we were discussing the fastest returns we had respectively had.
The one my college offered was quite remarkable, so I thought I would tell you about it here.
Mark was selling his car and had a sign up on the car parked infont of his house.
Within 10 minutes of putting the car up for sale, a random lady was driving past and inquired about the little four cylinder car, she had a v8 and was tired of the gas bills and was thinking about getting a smaller car.
Her car was a very attractive Chrysler and was easily worth $2000 but she just didn't want it anymore and mentioned to Mark that she would take almost anything for it.
Mark was asking $600 for his zippy little two door and they struck upon a bargain.
Within 10 minutes he had sold his car to her and now had another car to sell for $1200 to $1500 which was easily worth $2000 He sold it only a week later for $1750 This story serves to illustrate a point about investment.
You make your profits when you buy, not when you sell.
This pertinent point makes it clear that you make your decisions and your profits before you buy, because after you have bought, it is too late to do anything about the price you paid.
Mark knew that this deal had zero risk attached to it and even less was the risk that he would not sell, the reason why is because he paid so little for the $2000 car.
He could afford to sell it for $1200 and still make a double 100% profit on it.