Running a small business in the current financial climate can be tough. There are a plethora of challenges to be faced on a daily basis. If you’re a small business owner that is tired of the financial uncertainty that can happen, and would like a little more security to help flatten out the lows, then starting to learn how to invest small amounts of your money to provide a different source of income could be the answer you’ve been looking for.
While investing can become a great safety net for your business, there are many considerations to ensure your success. It can be a great tool for building your wealth, but it’s a common misconception that it’s only for the wealthy.
What is investing?
Investing, in its most essential form, is the act of committing money in the hope you’ll make a financial gain or profit. A portfolio of investments built up over time can allow your money to work smarter, rather than you working harder.
Investing can also be a great way to take financial responsibility for your future. It often means committing an amount of money, we would have used for something else, such as purchasing new clothes or going to a fancy restaurant. Swapping the instant gratification of consumerism for an investment in your future requires discipline and an acknowledgment of your responsibility to your future self.
Investing can take many different forms. Most of us are aware of the stock market, but stocks are from the only way to invest. There are also mutual funds, commodities, Forex, bonds, ETFs, or real estate.
Any act that involves staking an amount of money for future returns is technically investing.
Technology and investing
Over recent decades, technology has made investing more accessible to everyone. This has helped to drive down fees. Many of the functions of a traditional trader can either be performed by investors themselves, or by using a subscription-based platform.
Now we can jump on the Internet to compare brokerage fees. We can look at online reviews and often play with a free sample of their software. This has empowered investors and investment advisors by providing a range of new tools that can perform real-time research and analysis, and even warn you when certain pre-set conditions are met.
When you first start out investing the sheer volume of information can be confusing. Everyone knows what’s best or has a foolproof strategy to sell you. The best way to get started is to jump in at the deep end but in a very small way. You can start trading penny stocks, or only invest a very small amount, just while you get a feel for how the system works.
This will allow you to experiment with no real meaningful consequences. You can familiarize yourself with how the different systems work, what information and resources help you, and discover your own preferences. There are numerous approaches out there, and this is partly because there is no one system that fits all. As you progress you will gradually define your own parameters and discover what levels of risk you’re happy with.
Only using money you can afford to lose will prevent you from taking needed money away from your business. While you want your investments to enhance your income, it’s important not to be carried away if you enjoy some success.
Learn as much as you can
While there is an overwhelming amount of information out there, being selective can reap rewards. Join respectable forums and ask for advice on the best reading material, discover the best commentators to follow and learn from, search for helpful free resources, such as e-books, videos, free commodity charting, industry and investment news resources etc.. The more you know, the better you are likely to do.
Some investments require much more in-depth knowledge to take advantage of, while others require much less maintenance. If you’re managing your own investments, then the time commitment required should be a serious consideration.
As well as understanding the levels of risk you are comfortable with, it can be good to formulate a longer-term plan of what you intend to do with your investments. What are your personal objectives and goals? The goals for your business? Are you simply trying to accumulate wealth for the sake of it, or are you trying to ensure your retirement is comfortable?
Understanding these different factors can also help you to better understand your risk tolerance, and help you select investments that mature within a suitable timeframe for you to achieve your goals.
Variety is the spice of life
Diversify your investments. Having all your eggs in one basket increases your exposure to risk if something goes wrong. By spreading your money around, whether it’s different commodities, companies, or types of investment, you’ll help to mitigate this risk and ensure you never suffer any catastrophic losses.
This will mean learning about different types of investment, but you don’t always need to understand every minutia of a system in order to invest in it.
Always maintain a cool head
It’s not wise to go into investing expecting to get rich very quickly. Try to keep emotion out of your trading, instead relying on proven techniques and hard data to drive your decisions. Markets will always fluctuate, and a knee-jerk reaction can sometimes be worse than taking no action.
Shop around for a good deal
Whether you are speaking to a broker over the phone or using an app, there are always fees and charges. Sometimes it’s a set fee; other times it’s a percentage of your profit. Shop around and compare the different deals available, not just for the cheapest, but for the one that offers the most value to you.
Align your investing with your personal beliefs
If you’re new to investing it can be hard to know where to invest. However, where investors put their money can make a powerful statement. If you believe in sustainability or protecting the environment, then search for investments where the company acts ethically and with responsibility.
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