$1 = $100,000 = $1,000,000
Measure success by multiple, not dollar amount
All investments should be measured relatively. If you invest $1 and return $2, you didn’t make a dollar. You doubled your money.
Investing $2, $200, or $200,000 in the same vehicle will return the same multiple on your original investment.
With this in mind, if you don’t have a lot of money or you don’t have a lot of experience, you shouldn’t shy away from small investments… even into “expensive” stock… and you should always measure your success in terms of a multiple.
This isn’t necessarily intuitive. If you have $100 and buy one share of $100 stock, you only make $1 when the stock goes up $1. If, on the other hand, you buy 10 shares of a $10 stock, you make $10 when it goes up $1. That’s flawed logic, but it’s definitely how I invested early on.
In reality, the $1 increase for the expensive stock is 1% growth. The cheaper stock would need to grow 10% to gain a dollar. Therefore, if both companies grew at the same rate, the more expensive stock would have gone up $10.
Putting money into a 3x investment is always better than putting money into a 1.5x investment, no matter how small your piece of the pie. The amount of shares (or the percentage equity) only affects total profit in dollars. The win is the same for every investor.
It’s early in my investing career, but I think some of my small-but-expensive investments with good returns are why I’m as far as I am today. I should have been thinking this way sooner. 🤷
Follow my journey from non-accredited to full time investor at bootstrappedinvestor.com