Smart Investments for Small Businesses

Investing is definitely a skilled art, an art that we would all love to master. Maybe its to retire on that private yacht you saw in last week’s edition of Millionaire Lifestyle or to finally take your golf game on full time. In terms of investments for small businesses, though, it can be a great way to diversify your assets and include interest in your monthly cash flow. While you might very well be a genius investor, chances are that as you are busy actually running your own small business, you don’t have the countless hours to spare to fully research and find those few perfect stocks. The key to investments for small businesses is to be smart and follow Jeff Brown’s advice, “keep it simple, spread your eggs among many baskets, keep fees and taxes low and tilt the odds in your favor with indexed mutual funds and exchange traded funds.” You can be risky in many things regarding your small business; investing shouldn’t be one of them. When it comes to smart investments for small businesses, remember, simple is always better. HULT PRIVATE

Smart Investments for Small Businesses

Index Funds

As passively managed funds, Index funds can be great, smart investments for small businesses as they carry much less volatility considering they are intended to mirror the target index itself. While true, index funds won’t give you extremely high returns, they have much lower costs, taxes and risks involved, earning you usually consistent, stable rewards. Furthermore because they are passively managed, they require minimal attention time on your end-meaning, yes, more time you can devote to your business. As J.D. Roth smartly points out in his “Get Rich Slowly” Blog, “[Index Funds] are boring investments. But they work.” You can find index like funds through companies such as Vanguard, Fidelity and Charles Schwab.

Keep the Spread

When it comes to investments for small businesses, allocation is everything-well maybe not everything, but it is pretty darn important. Asset Allocation is essentially the diversification of ones investment portfolio into various assets, or better yet the percentage mix of stocks, bonds and cash in your overall portfolio. The key though is to have the right combination and not be too overloaded with stocks, which can indeed be pretty risky. Cash in a savings account, while safe, yields practically nothing. At the same time you should have enough cash on hand to last you for at least 6 months. Thus the majority of your assets should be put into Bonds, which will earn you about 5 percent a year, and are pretty stable. Finding the right mix is crucial-too much stock and you’re risking too much; too much cash and you’re losing out on potential revenue. Again though, simple and safe is always better.

Don’t Put All Your Eggs In One Basket

Diversity in your stocks themselves is also a must and a great way to mitigate some of the risk inherent within investments for small businesses. Holding massive amounts of shares might be a good strategy if they are in Google or Facebook, but if, let’s say, they aren’t and that one company which you put all you money in happens to go under, well better luck next time. Furthermore, you should also try to look outside your own industry in terms of investing, so as not to run the risk of being overly biased on your company’s own interests, for if things go astray within the one industry, so will all your investments.

It’s Not a Race

You didn’t create your business over night. Chances are you didn’t start your business on a Tuesday, and then wake up Wednesday morning to find millions of dollars in revenue. Good things take time, and the same is true with smart investments for small businesses. Rather than trying to constantly buy and sell, or play the in and out game, putting your money in then subsequently taking it out, sometimes it is better to wait just a bit and play it slow. As Brown states again in his New York Times blog, “To get the long-term gains you read about – 10 percent a year for stocks, for example – you have to leave your money in the market and reinvest all dividends and interest earnings.” Sometimes time is truly on your side.

Make a Plan

Smart investments for small businesses are anything but haphazard. When investing becomes impulsive, chaotic and disorganized that’s when it poses much greater risks, both for you and your small business. Thus, before doing anything, establish an investing strategy for your business so that you know what your goals are and how you would like to accomplish them. But remember again, when it comes to investing for you small business, simple, stable and safe is always the best bet. After all, why jeopardize what you worked so hard to build by being reckless in your investing.

Good Safe Rewards

While keeping your cash in a bank is indeed safe, it generates almost nothing just sitting there. Investments for small businesses, if done smartly, are a perfect way to secure your money, while at the same time generating much better returns. Even putting it in something as simple as precious metals, mainly silver and gold (whose price is consistently rising at the moment), is a great alternative to keeping it in the bank.

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