Hey there! My local coop grocery store is expanding. I went to a
members' meeting this week, and the project will cost $9 million, out
of which they're hoping members will invest $1.5 million. The coop has
been very profitable the past few years, and I believe strongly that
they will continue to be so at the new location. However, they
forecast losses for the first few years of their operation. I'm a
graduate student, and I don't have much money to invest, but I
strongly believe in the coop's mission and ability to be profitable.
But if I'm to think with my wallet as well as my heart, should I
actually invest a significant portion of my savings in this project? I
spent some time looking online to help answer this question. Most of
the sites were super pro-coop and so I wasn't sure what I had learned.
What do you think?

Not that past returns mean much, but when you say returns were
profitable, what do you mean.

What was the average annual return on investment for the past few years?
How much do you intend to invest?

If it does not greatly outperform the market, I would suggest sticking
to the capital markets as that will allow you to diversify.  Co-ops
are good and all, but it doesn't take much in the way of unfortunate
events to sink the shole thing (i.e. e. coli outbreak or something
else that insurance wouldnt cover).

Hi,

I think the local coop you're talking about is making mistakes:

- When the business is going well and procing profits but you change
it and expect to get some losses for some next year.  It is similar to
killing the chicken that gives you golden egg; it is against the
common sense, isn't it?

You can invest some in this coop but don't spend all of your money. 
The very first basic investment lesson I learn is to never put all the
eggs into one basket because if something went wrong, you end up with
broken eggs.

I have some more to say:

Things you know for sure:
- The coop is doing good business at the moment
- It is very likely to lose money in the next few years

Things you don't know for sure:
- If it will returns profit after a long time.

The point is that, you change the structure only if the business is
not going well, not at a good time.  If you hands is making money, you
wouldn't want to pick up a knife and cut it right?

The decision is your choice but with my investing experiences, I would
highly say "NO".

Let?s take your question: ?should I actually invest a significant
portion of my savings in this project?? and break it into three parts:

-	Is an expanding coop grocery store (at a new location) a good
investment? In this case ?good? means profitable.
-	Is that a proper investment for a person in your financial situation?
-	Should you personally invest in this opportunity?

The short answer to all three parts is ?who knows!? As they say, ?It
is hard to predict, especially the future?. But I hope that my
elaborations will help you to make a decision.
Will an investment in this project be a profitable one? An experienced
and knowledgeable person in the field of grocery stores could analyze
the business plan for the project and make a better conclusion then
you and I. Those specialists are usually found at Venture Capital (VC)
firms. Why should you try to obtain financing for your project from
several VC firms? First of all, just developing your proposal for VC
financing will force you to thoroughly think your project through and
that will benefit those who already decided to invest and clarify the
picture for those who are undecided. Secondly, if one or more VC firms
want to invest in your project, then it means that specialists see
high probability of your venture success. That would be the best
answer we could have now about the future of your grocery store.

Should the person in your financial situation invest in such venture
(even if all VC firms in the entire world expressed wiliness to do
so)? The answer is definitely ?NO?. In the best circumstances it will
be a high risk and illiquid investment. High risk means that even the
best VC investors do not expect more then one out of ten investments
to make money. Illiquid means that even in case of success, many years
may pass before you get your money out of this investment. That is so
widely recognized that even the government requires that people who
are qualified to invest into such ventures must have at least $5
million dollars cash in the bank (or so called liquid assets) and an
income of $500,000 or more per year.

And finally, should you personally invest? How you would feel if you
made the correct decision of not investing in this store, and then
this store became next Google, and every one who invested a single
penny in it became a billionaire? Would you continue to live happily
ever after? The bottom line is not to buy lottery tickets, it is the
worst investment any one could ever make, and yet someone will win
$300 million in Super Lotto! This decision makes you to look into your
soul and find out what kind of person you are.

Good luck!

P.S. If you are satisfied with my answer, then do me a favor. Send
your payment to Google (even if you don?t have to) and ask them to
donate ?my cut? to my favorite charity. That would be fair to all
parties.