Generating revenue and making money is great, but what you do with your profits will make the difference in the long run. Here are a few tips on how to increase your overall wealth with time.
We all know about not putting all your eggs in one basket and diversifying your portfolio. And that's absolutely important. But let's take a few moments out of your busy schedule as a small business owner to consider how to best use – and grow – your hard-earned dough.
1. Keep your investment decisions in lockstep with your business goals.
Once you have an investment opportunity outlined and vetted, it's easy to want to take the plunge. But anytime you enter into such an opportunity, it should be treated with the utmost respect for what may go wrong. And with any investment tied to your business, that can be quite a lot.
Investment decisions should neatly dovetail with your existing business goals. Review your business plan and current debt load. Also, never make assumptions about future revenue when considering an opportunity – after all, that's not how you operate your business normally, is it? In short, mitigate your risks by ensuring you only play the investment game with surplus profits. Anything else is too dangerous and may put your company in jeopardy.
2. Bet on mutual funds.
Sure, mutual funds may represent the unglamorous side of investing. It's hardly high thrills and high stakes, but hey, you and your business don't need to be concerned with "sexy" investments. It's all about the smart play. And mutual funds are very, very smart.
If you're new to the game, so to speak, you should always deeply consider mutual funds as a low-risk investment opportunity. While it will be relatively slow-growing, your fund manager will have you diversified out the wazoo, greatly reducing your loss risk. It's a fantastic way to see how the market works before taking your training wheels off.
3. Become a real estate mogul.
OK, "mogul" may be a bit tongue-in-cheek here, but real estate is a wise investment for small business owners.
Not everyone can play the real estate game effectively. There's often a fairly high barrier to entry. But as a business owner, you hopefully have a sizable amount of funds set aside that make such an investment possible.
While bonds and stocks are subject to the whims of inflation, real estate is effectively inflation-proof and offers multiple avenues to establish income streams, including these:
- Amortization – The act of paying down loans will liberate more resources that you can then use in additional property investments.
- Big-time equity – It's common practice to buy a fixer-upper, knowing that the value created through repairs will substantially exceed the cost of the repairs themselves. This relates to after-repair value (ARV), and it's savvy investing.
- Appreciation – Even if you're not planning on making repairs or improvements, your rental properties and homes will appreciate in line with inflation. Thus, if you purchased a home for $300,000 five years ago, you can expect to benefit from thousands in appreciation alone. And when it's time to sell a property, you can always forgo using a real estate agent and avoid paying a pricey commission.
4. Invest in tech – now.
The stock market has been on a roll lately, and the technology sector is particularly hot right now. While it's common practice to wait for a pullback in the market before investing in this kind of climate, pundits believe the rise will continue and that the time to jump in is now.
In the above article, Goldman Sachs strategist David Kostin cites that the market growth of approximately 20 percent over the past 12 months is likely to continue and that big tech will play a major role. Companies like Apple continue to soar upward: The tech giant stands to be the first company in history to pass the $1 trillion market capitalization mark in 2018 after breaching the $900 million milestone in November 2017 off the back of its successful iPhone 8 and iPhone X launch.
In sum, a keen focus on tech investment, a thoughtful approach to real estate, a safe and secure mutual fund play, and a constant adherence and dedication to your existing business plan are several best practices for any small business owner looking to make savvy investments. With the application of some of the above strategies and a measured, diversified approach to investing, you and your business can enjoy measured growth throughout 2018 and beyond.