How should I use $4,000 to make a profit of $20,000 in a year? Should I buy stocks or invest in small business?
Answer by Joseph Frantz:
This reminds me of a story I heard once [EDIT: found it linked at the bottom] about some teams of MBA students [EDIT: They were actually participating in a weekend bootcamp] who were given an envelope with $5 (seed funding) and two hours to make as much money as possible. Afterwards everyone would present their results.
Students then engaged in a variety of businesses.
The students who didn't use the money at all. They realized that the $5 was actually a limitation and sold their presentation spot for $500 to a local recruiting company, at a discount to the traditional recruiting fees charged by the school. They made 1000% on their five dollars. They made real money. Others, essentially, made nothing.
The moral of the story is that if you are starting with nothing (and let's be honest, $4000 is basically nothing, capital-wise, in today's economy) your most valuable resource isn't your money, but your knowledge, time, and creativity.
If you really want to make an extra 20k this year, I'd spend that entire $4000 on books. Try to pick up ones on a variety of useful topics such as history, engineering, and finance. Read all of them and I guarantee you will be worth an extra 20k, whether you decide to start your own business or work for someone else.
This example comes from the following talk: