Wednesday, February 4, 2015

Bad Business, Bad Investment?

As mentioned before, a good business can be a bad investment. However, what about a bad business, bad investment?

The other day, I was at Takashimaya with my friends. While walking around, I saw this ATM machine!


The interesting thing about this ATM machine is that there was a guy standing beside the machine explaining to people how it works.

To be clear, I own precious metals and I think that precious metals should be in everyone's portfolio as an insurance, and above and beyond that token amount, it can be an investment if you find it attractive.

However, as a business, this is just a pretty horrible idea, isn't it?

Most things sold in vending machines are sold as convenience items. I don't see how any person would think to themselves, "oh gosh I feel like buying a gold bar today". Unfortunately, just like insurance (which gold is a form of portfolio insurance), gold has to be SOLD to you. People don't go around thinking and wanting to buy gold. Heck, most people don't even own any in the first place. People sold on the idea of gold would probably have their own preferred shop to buy their gold from, rather than some vending machine.

Personally, as innovative and cute as this idea sounds, I think it is a horrible way to sell gold. If this was a business, I wouldn't invest in it. The underlying investment of gold itself is a good investment in my view, but not this business and its model is probably not going to be a good long term investment in my opinion.

When it comes to what determines if an investment is good or bad, I think the most important thing is the entry price of the said investment. If I was being sold the entire business with their inventory and ATMs for a a steep discount to their asset values, of course I'll buy it. I'd raid the company, fire and wholesale off its assets and pocket the difference. But I definitely wouldn't want to own this business with the goal to run it.

2 comments:

  1. Interesting that they probably even have a person there to explain. Maybe the idea is to lure these people who doesnt want to buy via a vending machine to go to their shop to buy. Maybe its just a machine to create awareness.

    Ive seen this machine before too. But let me try to see in closer detail next time I walk past them.

    ReplyDelete
    Replies
    1. Hey B, I actually thought having a person there to explain defeats the purpose of having a machine in the first place! I was kind of shy to find out more, but I guess next time for the sake of having a better understanding of what is actually going on, I will dig out more info. Never thought that perhaps it's a mechanism to drive traffic to their store! Let me know what you find out!

      Delete

Observe the house rules.