I have little capital to invest, should I invest it in the stock market?

Well, as it turns out, this question is really multi-dimensional. To answer the question we will analyze the two most important and common dimensions: Your Career and Your Investment.

The answer is simply this. Which one will make you more money?

Strategy #1:

Should You Even Be Investing?
Work vs. Investing

Let's say "little capital" means something like $10,000. Suppose you invest that in the stock market. You pick your own stock by watching finance channels, reading financial statements online, and keeping ahead on the news events. You diligently work 2 extra hours per day on these investing activities. And you make 15% annually which is well above average. So that year with your effort, you made $1,500.

Hmmm, $1,500 for about 2 hours/day. This comes out to about $2.88 per hour. Wow, that is actually below minimum wage...

Say you make $60,000 per year. If you devote that extra two hours per day to your job, can you make more? Would 25% extra effort make you stand out from your co-workers? You only need a 2.5% raise to beat your investment in the stock market. If you are paid hourly, you can make up to $15,000 more by working 2 extra hours per day. Morever, this is a compounded effort. 25% extra effort devoted to your career could be the difference between becoming the president of your company or a division director one day.

However, when your "stock-investable" net worth exceeds your income then it is a whole different story. With $60,000 capital, a 15% return equates to a profit of $9,000 profits annually. And You will need a 15% percent pay raise to beat that.

The following table should make things clear:

CASE 1: Salary > Stock Investment

Specific Numbers:
Salary = $60,000
Stock Investment = $10,000

Salary x (2.5% Raise) = (Stock Investment) X 15% Return

Conclusion: It makes heck of a lot of sense to bang away at your career.

CASE 2: Salary < Stock Investment

Specific Numbers:
Salary = $60,000
Stock Investment = $100,000

Salary x (25% Raise) = (Stock Investment) X 15% Return

Conclusion: What! I need a 25% raise to make more than my investment. I need to focus more on the more profitable income source.

CASE 3: Salary > Stock Investment

Specific Numbers:
Salary = $60,000
Stock Investment = $20,000

Salary x (67% Raise) = (Stock Investment) X 200% Return

Conclusion: Holy Moly! 67% raise will probably take maybe more than a couple promotions. But how can anyone make 200% in a year?

It turns out that making in excess of 100% per year is not that difficult if you follow with discipline systems that had been proven:

1. Value Investing (Ask any self-made billionaire)
2. Insider Trading Analysis(Illegal?)
3. Industry Trend Investment (Retiring Baby Boomers)

------------------ Conclusion ------------------------

What we have done is a very crude analysis of a hypothetical situation and it is very enlightening. There are really ONLY two choices before you have a net worth greater than your income:

1. Work Harder At Your Job
or
2. Attain Superior Return from the Stock Market (which can be risky if you don't follow a proven system like value investing, insider following, and industry trend).

For many people, it is better just to work on your career. You are the only one who can really assess your situation and decide.

Author's Bio: 

David Teng is the president of Value Discovery, Inc. Value Discovery publishes free weekly newsletter on investment strategies and a global alert newsletter for elite investors. For more information visit: http://www.value-discovery.com or To subscribe email to: value-discovery@aweber.com