A friend called me up a while ago asking for my opinion on where to put her money. It’s funny really when my rich friends ask for my financial advice. Part of me gets depressed since I wish I had similar resources. Part of me gets an ego boost since at least some people look for my advice.
Anyway, here’s her dilemma. She’s choosing where she could invest her money in a time deposit account or in some shares in a business that’s being developed by some of her contacts.
The barest facts:
- She has an emergency fund
- The line of business is in a growing industry focusing on necessities
- The stock is expected to go up quickly
- The stock offering will close in two days
The thing with time deposit accounts is that while they offer quite a lot of security, interest rates these days are so low. Still, CTDs are PDIC-backed so, in terms of risk, CTDs are almost zero-risk.
Now she has an opportunity to buy some stocks that can quickly appreciate and offer great returns for her money. It’s a mid-term thing but the risks are considerably higher since the business has still yet to start operations even though all trends current trends point to growth.
I think the scenario basically rests on how open she is in taking risks and in this case, she is. She has an emergency fund, a steady job, and family wealth to have as buffer just in case the worst scenario pops up anyway.
My bottom line: I advised her to think about getting the stock, as long as it’s money that that she can lose (worst case scenario) and the (potential) loss wouldn’t driver her to commit suicide. The opportunity’s closing and if the gambit doesn’t really bother her, then it’s a risk that she can really consider.