What in the world does selling junk on eBay have in common with fancy pants stock market investing?
I’m assuming that’s what went through your head as you read the title of this post. I’d probably think the same thing if I hadn’t been immersing myself in both the FIRE and eBay seller communities for the past year.
Now that I’ve had some experience with both, I thought it would be fun to compare the two and see which one I’d choose if I had to pick only one to invest my money in.
Selling on eBay is a great way to fund your investments
Since you don’t have to pick between the two, I suggest you sell on eBay and invest in the stock market. You could start a five-figure eBay business with less than $100 starting out.
This is possible because you can easily find items for $5 and sell them for $50. Once you’ve sold your item and have the profit of $40+ dollars after fees, you can use all of that money to invest back into purchasing items.
Do this long enough and you’ll be making several hundred dollars a month and be funding it all from previous eBay sales!
I’m currently investing the profits of my eBay business back into purchasing new items, learning new skills and things like this blog. Let’s look at what I could do with the eBay money if I invested it in stocks.
Let’s say I profit $500 a month and invest $350 of it after saving for taxes and such, so it would be $4,200 a year. I’ll calculate the interest at the average return of VTSAX which is the fund I invest in.
That’s a cool $65,711.05 after only 10 years of investing a meager $350 a month. Now, let’s say I do this on top of investing $1,000 a month in my 401k each month (which is what I’m currently doing.
Not too shabby… I expect to blow this out of the water though by growing my income through another side hustle I’m currently working on and eventually this blog. If I wasn’t investing money back into myself, it’s nice to know I can still kill it in a 10-year time frame with just selling on eBay and investing in my 401k.
Now, let’s compare eBay and stocks!
How does selling on eBay work
Selling on eBay is simple, but the way you get items to sell can be very diverse. For most individuals who sell on the platform, you find your items at different places for a cheap price and list them on eBay at a higher price. The reason you’re able to sell items at a higher price on eBay is mainly due to having such a high customer base.
There are some people who get items in bulk at a wholesale price and are able to list the items on eBay to sell at market rates. This is more like having your own e-commerce store but is easier than creating a website because eBay gets so much traffic and your website might not starting out. It’s also a lot less work to sell on eBay than to create your own website.
How does the stock market work
I’m not a stock market expert, so you can check this article out for a better explanation. At a high level, when you purchase a stock, you’re purchasing a small portion of a company. The stock price is determined by supply and demand and goes up and down depending on how the company does.
Usually, you invest in the stock market either through your company’s 401k or in an individual IRA. If you’re fortunate enough to earn enough money to max out your retirement accounts with money left over, you can invest in the stock market through taxable accounts and withdraw the money whenever you want. You can also set up your own retirement account if you own your own business. The maximum you’re allowed to invest is a lot higher when you own your own company.
Pros/cons of selling on eBay
Like everything in life, there are positives and negatives when it comes to selling on eBay.
- You can make money quicker than you can in the stock market.
- If you can get your items for free, the only money you can lose is what you pay for shipping supplies/eBay fees, etc.
- You can use the money you make from sales almost instantly.
- You can build a lucrative business with very little money starting out.
- Hunting for items can be a fun new hobby.
- You’ll have to invest a significant amount of time to build a good income.
- There’s no guarantee that eBay is going to be around forever.
- Items you list might not sell for a long time.
- Customers can return items when you sell them or the items can be damaged in shipping.
- You’ll have to either sell small things or have a good place to store your inventory.
- You’re required to pay taxes on your profits, just like any other business.
Pros/cons of investing in the stock market
- Investing in stocks can be very passive.
- When you invest in index funds, you’re almost guaranteed that your money is going to grow over the long run.
- You can lower your taxable income if you invest in certain types of accounts.
- Due to compound interest, your money will continue to grow over the years even if you stop investing.
- If you invest enough money, you’ll eventually be able to live off the interest that your investments bring and won’t have to work at all if you don’t want to.
- The stock market is very volatile and you can lose the money you invest if you withdraw it when the market is down.
- You’ll have to invest some time to learn how to withdraw from investment accounts. Especially if you intend to withdraw from a retirement account before age 59.
- It takes time to for your money to grow.
- The market might be down when you need to withdraw. This would result in using your money up faster.
How do the two compare?
If I were only going to pick one of the two to invest my money in, I’d pick the stock market. eBay is only one company and they could go under at any time if they make poor business choices. I think there will always be an online marketplace to sell on and you will still own your inventory if eBay goes under, but it’s riskier than investing in stocks.
When you invest in index funds like I do, you own small portions of every publicly traded company out there. This means the entire US economy would have to crash before I lost all of my money. We’re guaranteed to see rough patches in the market, but the market has always recovered and gone up over time.
Another reason why I’d choose stocks is that it doesn’t require any work. Once I’ve got enough money invested, I’ll be able to live off the interest my investments earn and not have to work at all if I don’t want to. You know, the whole financial independence/retire early deal.
Jay and Ryanne over at Scavenger Life take a different approach than I do. They pulled all of their retirement money out of their accounts, moved to a rural area and used the money to live on while building their eBay business. They grew their inventory into the thousands and then started using their profits to invest in real estate.
Now I think they earn enough money to live off of their rental income and anything they make from eBay is icing on the cake. So, you could invest in real estate and not invest in stocks at all if you choose. Either one is a great way to invest your income. Real estate is less passive than index fund investing, so I like stocks better personally.
What are you doing with your money? Investing in a business, stocks, real estate, or a combination? I hope you’re at least doing one of the three!
Nathan created Millionaire Dojo to document his journey to reaching a million dollar net worth and inspire others to follow the same path. Go here to read how he intends to become a millionaire and reach financial independence. If you’d like to contact Nathan, you can do so here.