This question was exactly what I asked myself some time ago. This question is what started my journey to professional independence, and lead to the creation of this blog.
One day I was reviewing my family’s financial situation. There were long-term investments, rainy day savings, sunny day savings, and so on. Most of the funds were purposely invested. However, there were also these $5,000 that had no designation at all and were making an extremely meagre return, something around 0.75%. Yes, less than 1%.
Then I asked myself – what can I do with $5,000?
There were several immediate options. I will explain why I did not choose either of those.
Invest in real estate
Yeah, right, with $5,000. I am yet to find a single investment in real estate that would require only $5,000 of my capital, so not an option!
Invest in GIC
GIC is a Guaranteed Investment Certificate. As the name implies, your investment (the money you put in) is guaranteed at maturity (when you get your money back), plus you earn a modest return. The rates back then (and even today) were not that great, somewhere around 1% to 2% with no liquidity (that is, you cannot get your funds back before maturity). Better than the current situation, but still not sufficiently high, about $50 to $100 annually.
Not very exciting, and you don’t have the money. As always, the bank wins, so no thank you. By the way, if you are looking for a place to shop for GIC rates check out ratehub.ca
Invest in stocks
Now, this sounds a little more interesting. However, $5,000 will not get you too far, and again you lose on liquidity as stocks are typically longer-term investment due to market fluctuations. Not a day trader here. Even if I were after dividend stocks, there was still the risk of capital loss in the short term.
Top-up the RRSP
Yes, I could do that. And perhaps this would have been sensible. However, it has poor liquidity as I have no plans of drawing funds from RRSP. Moreover, that would mostly be more of the same – long term investment, not very exciting.
Invest in your own micro business
The last option was to start a business, and this is what I decided to do. And yes, micro business is a term. Essentially this is a small business that is smaller than a typical small business. You get the point.
My idea is to have a small e-commerce website selling imported goods to a niche market. The reason I chose this business model was the low initial costs, well below $5,000, which would give me quite a bit of room for growth.
It also sounds fun, controlling your destiny and all. This blog will focus on setting up and running this micro-business, at least for now.