[t_mann]

Not defending EMH in any way, but there's a logical flaw in your argument: your wording implicitly pits a cherry-picked example against a broad average: "it's literally impossible [to invest in a small business and beat the market]" - that's not the point. There will exist examples where that worked, but there will also exist some where it failed (like in the article). You have to consider all those cases to compute an average return. And even if you do come up with a higher expected return for a private investment (I don't have the data), you also have to consider the variance/risk: a bad outcome for the S&P500 is maybe minus 20-40% in a year [0]; a bad outcome for a franchise can look like bankruptcy and/or eviction, like in the article.

I'm with the GP poster: if you're thinking about running a business in passive mode as an investment, as it seems it was pitched to those franchisees, you're highly likely better off keeping it in boring investment products. That's not even saying that sane (ie positive risk-adjusted return) passive income opportunities don't exist, but they almost certainly won't look like what's described in the article, with no strategic freedom (you're not allowed to close an unprofitable shop, wth?); apparently coupled with personal liability and massive fixed and upfront costs, that's an absolutely deadly mix. More generally, they will almost never come to you as a pitch, which should be self-evident.

[0] https://www.macrotrends.net/2526/sp-500-historical-annual-re...

[hash872]

If you don't have data on private investments, how can you say anything about how they compare with an index fund? As a passive investor in a local business, my losses are pretty limited by their corporate structure.

I've been self-employed for about 6 years now, and my return on my original invested capital is hundreds of % a year. My potential losses are highly limited by being incorporated- I can always just close the business and walk away. I think it's ridiculous to compare my little company with an index fund, but I also think it's pretty silly to make sweeping statements comparing public stock markets with private investments. It's OK to say that 2 completely different things are apples & oranges

[t_mann]

I'm saying what data you should be looking at when you're comparing investment opportunities, not doing the work of assessing specific investments for you.

Being self-employed isn't a financial investment, it's a form of labor and most certainly not passive, hence why the comparison fails.

[hash872]

What is the body of evidence that leads you to think you can't exceed a (totally unrelated) benchmark when investing in privately held companies? Can you cite some studies? The reason we know EMH 'works' for public markets is decades of research. What research lead you to a similar conclusion for private markets, can you link some of it here?

[t_mann]

I haven't said nor implied that, I've made a nuanced statement, but you seem hell bent attacking some strawman, good luck with that strategy and bye.