Better Investment: Stocks vs Internet Assets

I’ve been thinking about investing.

With the upset in the markets over the last few months due to the credit crisis, and a looming recession in the US which has led to record low interest rates as a last ditch effort to keep the economy growing. With many stocks taking a nose dive, I’m weary about putting more money into my stock investing account until we hit the bottom.

I’ve been trying to think of good alternate places to invest. To diversify my investments to something that has the potential returns of the stock market but isn’t as susceptible to market swings.

After reading a couple of blog posts (such as Why Do So Few Bloggers Sell Their Own Products? by Yaro Starak) and doing some pondering. I’ve come to the conclusion that investing in assets which you can turn around and sell could prove far more lucrative of an investment.

One of the things that I’ve done for this website and my online business ventures is to set aside some money automatically from my bank account into a savings account. This money is to be used to get HalOtis profitable and increase the cash flow. In the past I’ve used this money to pay for Google Adwords campaigns and pay for hosting of sites.

The missing part of the picture has been lack of products and business assets that I own and can resell over and over to continue to make a profit passively.

Lets compare the potential costs and returns from an investment in product creation vs. the stock market over a one year investment period.

Case 1

$1000 could be used to outsource the creation of an ebook and marketing material that would sell for $25. If you add in about 20 hours work to do some videos for youtube, find some affiliates or jv partners, create some webpages and link to those site with the social sites. The sale of just 40 copies of the book is the break even point. Lets say you have a fairly terrible launch and over the course of the year manage to sell just 50 copies. That works out to a total income of $1250 subtract the $1000 cost gives $250 profit or 25% return on investment for the year.

Case 2

$1000 invested in the market during an average year should return about 8% if invested in a market wide ETF. Of course, you’re at the mercy of the market the only thing you have control over is when you buy and when you sell. Market timing is notoriously difficult. Still, lets assume you had an average year and you’ve made your 8%. That’s $80 minus trading costs.

What’s the biggest difference between these two scenarios? In case one, you’re in control you decide what the ebook will be about after testing the market, you build the anticipation, you control the quality of the product and can do what ever it takes to create something that people want and then convince them to buy it. In case two you’re at the whim of the market, and of macro economic trends. There’s very little if anything you can do to influence your chances of beating the market.

Furthermore, it’s possible to leverage the exposure you get with this first product in case 1 for subsequent products. There’s the chance to create an email list, build authority, make connections to other sites, get more exposure in the search engines etc which can be leveraged time after time to get a bigger and bigger return each time. Not to mention that you can sell other peoples stuff at no cost for even more income!

When looking at these two scenarios side by side it’s easy to see that investing in your own product creation is a very effective way to invest your money.