Small business owners are always looking for investments. They want to put their money in places that will come back to them in profits. Some do this through investing in their local community. They purchase their supplies only from local merchants instead of chains or they buy things from those with whom they network.
This allows your money as business owner to help people you know, like and trust. It helps local businesses to flourish. Your community grows profitable as a whole and comes back to you because they want to do business with someone who supports them.
While investing in local merchants and networking partners is a good strategy, it is not the only option available to small business owners who are looking for profits. Some take the leap to understanding the stock market and begin investing there. If you are new to stock market investing, here are five ways you can start your journey toward profitability.
1. Diversify
Most financial studies have found that the most successful business owners keep a balanced portfolio. You want to pick different types of stocks, bonds, real estate, land and other investments in your portfolio. The companies that lose significantly when investing on the stock market choose one type of stock and put all their money in that one type.
You also want to keep money set aside for quick cash, such as money market funds or savings in a bank. Although those do not earn much in profit, they help the business owner keep cash they need when necessary or emergencies happen.
Keep a low percentage of investment in bonds. When you own several types of stocks and investments, you won’t have to worry about crashes. Some might be up while others are down. The same for investments. Bonds might be risky while stocks are safe or the opposite depending on economic conditions.
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2. Save More
Every month, you should be putting aside more money into savings. The general rule is that you need six months to a year of savings in case of emergency. If you currently put $25 a month in savings, you might want to increase that to $50 a month. If you put zero dollars a month in savings, you should change that to putting something in savings. The more you save, the more likely you will be able to survive an emergency or crisis.
3. Buy the Funds
The easiest way to begin investing in stock markets and getting the diversity you need is to purchase mutual funds or exchange-traded funds. These products have money managers that watch the stocks within them. This means you can get back to what you do best while your money managers do the work of picking the stocks. One fund will have many companies’ stock in it. Most funds have different types of stocks in the fund — some risky, some safe, some in-between.
4. Index Your Stocks
Standard and Poor’s and Dow Jones have indices that help you know what stocks are the best traded. You could choose the mutual funds that focus on these index stocks. This is a good way to get started in trading on the stock market because you put your trust in companies that have been around the stock market for more than 100 years and know the exchange well. The companies know the movers and shakers so you don’t have to know them. Small business owners would gain many profits this way.
5. Choose Low Fees
Mutual funds make money by charging a management fee. When researching where to put your money, choose the mutual funds with the lowest fees to manage. This will save you profits over the long term of investing in stock markets.
Author: Usman Raza is freelance writer, an author and content marketing specialist for Headset Zone and whiskmatcha.com. When not working, he’s probably spending time with his family. Follow him on Facebook @usmanraza40 and Twitter @usmanintrotech.
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