Can you manage the risk? Every opportunity isn't for everyone.
What if I were to offer you the opportunity invest in a coin flip for $2 cash. If the coin comes up heads you will win $10; if tails you will win nothing.
You would probably immediately take me up on the offer. You could manage the $2 pocket money loss if it happens and $10 would be nice.
Now what if I were to offer you the opportunity to invest in a coin flip for $2,000 cash. If the coin comes up heads you will win $10,000; if tails you will win nothing.
You would think a little more about this, but again you would probably take me up on my offer. You could manage the $2,000 loss if it happens and $10,000 is a worthy payout. However you might need to talk to a spouse, or visit a bank to get the $2,000 as that probably isn't just in your pocket.
You might also create a syndicate and invite 10 of your friends. That way your risk is only $200. This is a classic way of managing risk.
Now what if I were to offer you the opportunity to invest in a coin flip for $2,000,000 cash. If the coin comes up heads you will win $10,000,000; if tails you will win nothing.
My guess is $2,000,000 is not pocket change for you, nor probably easily available. You would probably pass. If you have the right friends you might create a syndicate to manage the risk, but most likely you would just pass.
The expected value of each of these investments is the same rate of return. What is different is the amount. Warren Buffet or Bill Gates might only be interested in the $2M opportunity because the other ones aren't worth the time to confirm and they could raise that much cash quickly and the loss wouldn't be catastrophic.
You and I would only be interested in the lower value opportunities where we could manage the risk.
I hope this helps you understand why some opportunities are best suited to different investors.
Rick
