Saving or Investing: How Should I Invest in the Future of My Business?
Once your business starts generating profits, you find yourself with more on-hand capital to allocate as you see fit. Any business pursuing growth will of course look to reinvest these profits in the business itself, in order to secure a stable and profitable future.
Actually deciding where and how to allocate these funds can be tricky. There are countless options available for making your money work harder, but which hold the biggest potential for long-term gains?
Saving Vs. investing
One option is to save and stockpile your profits in the traditional way; you open a savings account, you put away as much as you can afford to and you watch as your balance steadily grows. Unfortunately, the financial benefits of this particular approach are slim to none and can actually prove to be counterproductive.
A savings account is a safe place to stockpile money, with none of the risks associated with investments; the amount of interest you will accumulate over the years could be nowhere near enough to counter inflation. Ultimately, this could result in your money actually losing value over time.
The alternative option is to consider viable investment opportunities such as property bonds. With this approach, you balance the inevitable risks of investing with the potential to generate meaningful gains over time. There are no guarantees, but adopting a strategic approach can ensure you never take risks you cannot comfortably cope with.
What’s the Safest Way to Invest as a Small Business?
Investing safely as a small business means considering your own risk appetite and taking things from there. Every investment strategy is 100% unique, in accordance with the approach, attitude and on-hand seed capital the investor has available.
There are several universal good practice guidelines that always apply:
1. Have a Plan
It is essential to have a plan in place, as opposed to simply making things up as you go along. In addition, your strategy must be aligned with your business plan, your financial circumstances, your current debt load and your business goals.
2. Consider Penny Stocks
Penny stocks can be a great place to start. They are comprehensively affordable; typically available for £3 or less and make it easy to establish a diverse introductory portfolio. They are also highly volatile, potentially paving the way for decent profits. Volatility brings elevated risk, mitigated by the low purchase price of penny stocks.
3. Diversify Investments
On that note, the ‘all eggs in one basket’ approach is best avoided. A diverse portfolio of investments not only reduces overall risk, but gives you the best possible chance of at least some of your investments paying off.
4. Calculate Fees and Taxes
Remember to factor all applicable fees and taxes into your calculations, when determining how much of your money you plan to invest and where. Profits generated by investments are taxable and commissions apply when trading via an online platform.
5. Seek Independent Advice
Irrespective of your objectives, budget and risk appetite, consulting with an experienced financial adviser at the earliest possible stage comes highly recommended. This will help you develop a better understanding of the options available and which investments are suitable for your short and long-term goals.