A Note on e-Bay Forex Arbitrage and Risk in General

For everyone who read my post on Foreign Exchange Arbrirage on e-Bay, I would suggest you do not try this right now. Since the Dollar is so uncertain right now, and foreign exchange rates are going nuts, this is not the best time to do this. If you have Euro's, now may be the time to sell, but I would not suggest purchasing Euros from a third party to sell on e-Bay currently. This is still a decent strategy, but in this uncertainty, there is a much higher risk than there would normally be.

Whenever you are looking potential business deals, or exchanges, always look at the risk. Higher risk usually means higher reward, but this is not always the case, so you need to consider both risk and reward. If you need to risk $100, but stand to make another $600, that's a much better risk than say risking $100 to make another $100. This is more apparent in the bond markets; higher risk doesn't always guarantee a higher potential reward. Furthermore, a lower risk does not always mean a lower reward. There are safe investments that can produce 4-6% returns, which is not as high as many high risk investments, but it is still ahead of inflation.

I know I must sound like I'm strictly talking about Equities, Bonds, Forex, etc. investing, but in any business, you must consider the risk. With a new restaurant, there is high risk (something like 98% failure rate) but do you stand to make a lot of new money? Not really, unless you become wildly successful and can create a chain. Why do people do this then? Usually because of a passion: I would not typically view a restaurant as a wise investment (excluding chain restaurants)

I just thought I would throw out a few thoughts on risk. It never pays to be cautious, but it can be even more costly to be overly risky. If you have a desire to learn more about managing risk in the markets, there are MANY good investment books out there; check out Amazon.

I finished reading the book Liar's Poker recently, and it was great, it was basically a narrative of one bond trader's excursion through the industry; how a bond trader is part investor, part gambler. It's quite a good read, I would suggest it for anyone interested in learning about the behind the scenes of the Bond market in the 1980's. He also discusses in detail the formation of Mortgage bonds at his company (Salomon Bros.)

That's all for today; I really like being able to write about other things besides just starting businesses in your dorm room, it gives me much more to think about.