What’s that ebook racing system really worth?
Roll up, I have a new system for you, for no effort and little skill you can bag £50k a year and Sir, for you today, it’s only, Not £499, Not even £99, but just £37. But hurry I am closing offers on Friday and I only have 20 left!
Hmm, I bet you heard that pitch before, it seems every day my inbox is accosted by offers telling me they have a foolproof system for sale. But if you actually successfully created an a,b,c formulaic, foolproof, net positive system how much would you sell it for?
Let’s say it was capable of being run by a monkey, as most of things are positioned, your first shot would be to get a monkey to run it, not you. Mr Monkey could sit there each day flicking through the racing papers, making a few selections and then putting your hard earned capital to use. Lets say we pay Mr Monkey £10k a year for his ‘efforts’. OK, now lets assume that after funding Mr Monkey, our system leaves us with £20k a year.
Coming from an investment background, generating £20k a year after costs means you can work out roughly how much you are willing to pay for that return. Let us put a margin of safety in first. We will be cautious and discount our potential earnings by half to £10k. With interest rates very low, lets assume want a generous 10% return on our capital per annum. Now we can divide £10k by 10%, this equals £100k. If we could outsource the work, we would be willing to invest £100k to return £10k. Perhaps not just once either! We could raise money from investors, offer to pay them a market beating 5% and use their money to leverage up the system.
So that £37 sounds like a absolute bargain doesn’t it, given that an investor would pay £100k for that income stream. Can you spot the flaw? Unfortunately, whichever way you look at it, everything requires work and some skill, even given the best advice. Never forget that.
Category: General, Trading strategies
