When you start to make a decent income from your business dealings, it’s time to think about siphoning some of it off to create a fund that will give you more flexibility in the future. If you can resist taking money out of them too often, then well-chosen investments can put you in a very strong position. What you need to work out is where to start and how to make your investment choices chime with your wider aims.
1. Make money from share trading
The bedrock of any strong investment portfolio is stocks and shares. Diversifying these across a number of different companies – and, if possible, different sectors and different countries – gives you more security in the face of potential economic slumps. You should also aim to select a balance of lower-risk, slow-ripening stocks, which may not pay as much in dividends, and fast-ripening stocks, which tend to carry more risk but will generate earnings for you more rapidly. Though you should be ready to cut your losses on declining shares, holding onto others over long periods can make your portfolio – and your business – stronger over time.
2. Use shares strategically
Did you know that if you own a single share in a company, then it entitles you to go to shareholders’ meetings? This means that by buying shares in other companies in your sector, you can go along and get an inside view of what they’re doing. Buying shares in companies in your supply and distribution chain can also give you a better chance of persuading key players to trade with you and give you good deals. Finally, you can use shares as a means of making contact with key players in other industries with whom you’d like to network.
3. Pick up a package
If you don’t want to use an investment advisor and you’re not sure about your ability to balance an investment portfolio yourself, then one solution is to choose a pre-packaged set of shares that is already balanced. There are lots of packages out there, so you should have no difficulty picking one that ties in with your business interests or supports another concern such as being environmentally friendly or supporting entrepreneurs from under-represented minorities. Over time, you can add further packages to build up your portfolio.
4. Hedge with CFDs
If you want to provide yourself with some insurance against a potential downtown in the value of your shares, then you can hedge your portfolio with CFDs. You can find a more detailed explanation at learncfds.com, but essentially what this involves is speculating on the change in value of a set item over a set period. Because it allows you to take a short position without breaking regulations, you can use it to offset potential losses on your shares or other assets. Once you get the hang of them, CFDs are easy to understand, and when you use them in this way, the associated risks are low.
5. Back it up with bonds
Perhaps the single most stable asset type that you can choose to add security to your portfolio is bonds. Though Treasury bonds are the most common, there are several other sorts of government bonds available, and you can also choose options such as mortgage-backed bonds. Though you shouldn’t expect to make a lot of money out of these, especially in the short term, they can do a lot to help keep your situation stable over time.
6. Set up a pension fund
All too often, entrepreneurs are so busy thinking about business opportunities and responsibilities that they forget to make adequate provision for their own futures. A pension scheme can protect you, protect your staff, and act as a useful financial asset at the same time. There are numerous ways to save tax on the money placed into it. However, you can potentially count it as an asset when the value of your company is being assessed, so, for instance, it can help you to get better deals on credit. If you pay into it regularly without any problems, then it will also help to improve your company’s credit record.
The most important thing about setting up your investment fund as an entrepreneur is that you resist the temptation to dip into it when other funds are low. It’s important to allow your investments time to mature properly if they’re to be worth your while – but provided you choose wisely, making investments will always put you in a stronger position than simply leaving your money in the bank or leaving your business ventures with no back-up.