Building up a business requires a healthy influx of investment capital. However, selecting the right investment vehicles can be challenging, especially if you’re new to the world of bonds, stocks, futures, and options.
Foreign exchange, real estate, and exchange-traded funds are highly popular investments at the moment, but there are also a few additional vehicles to consider. With that in mind, here are six ways to invest your capital and grow your business.
Business owners should consider the extra profit that can be gained through stocks. Shares put your money to work and signal confidence in other companies, and any profit gained as a result becomes a rising tide that lifts all ships.
For example, if your company is part of a production chain, investing in stocks from manufacturers, retailers, and other production partners could be beneficial. This way, you share growth profits and have an increased presence in your chosen industry.
When a company gets listed on the stock market, its profits are divided into shares and split amongst shareholders. In other words, buying stock allows you to obtain a percentage of the assets and profits of a listed company.
2. Real estate
Real estate has multiple benefits for discerning investors. You can buy and sell properties to turn a profit, get a fixed income from rental properties you own, or simply buy a space for your business and not have to worry about paying rent.
Rental costs are skyrocketing, and many fledgling businesses are in a constant struggle to keep up. The cost of renting out prime real estate is exorbitant at the best of times, and the ideal solution is to remove rent-related overheads.
Although it usually takes more capital than any other investment types, real estate is one of the best ways to grow the wealth of your business. If you have a substantial amount of unallocated funds available, consider investing it in properties for a high rate of return.
Bonds are a form of high-quality corporate or government debt. They fall under fixed-income investments, where you gain profit based on a percentage of interest. Essentially, you’re providing a loan for the issuer of the bond and getting regular payments in return.
Bonds possess less risk than stocks overall, but they have smaller returns, and interest rates can be relatively low. They’re easy to obtain and can be sold early, and investors who prefer safer odds will find them most appealing.
In general, government bonds (such as city and state bonds, for example) are safer than corporate bonds, but they both have a higher degree of security compared to stocks, foreign exchange, and other high-risk, high-return vehicles.
4. Managed funds
In an investment fund, your money contributes to the purchase of a diversified portfolio of assets. The fund pools all investor money to achieve this, and it’s managed by a financial expert who offers a high return on investment (ROI).
The two main types of funds are indexed funds and exchange-traded funds (ETFs). Both are selected from stock indexes like the S&P 500, but index funds only get quoted at the end of the day, whereas ETFs can be traded throughout the day.
There are tax costs and management fees involved, but these are small prices to pay for the benefit of having a professional manage your investments. What’s more, asset diversity in these portfolios ultimately leads to reduced risk and increased investment options.
5. Foreign exchange
The foreign exchange (forex) market is a global marketplace where international currencies are traded electronically. It’s a high-liquidity market where traders exchange trillions of dollars on a daily basis.
Forex is considered a high-risk investment vehicle, and even though the potential for profit is hard to ignore, investors need to have a keen eye and perform a fair amount of research. The good news is that there are plenty of useful tools and knowledge sources out there.
Currencies are in a near-constant state of flux and highly volatile during peak trading hours. Because of the market’s provision for high leverage, many businesses use forex trading to increase their borrowing power, which makes it ideal for scaling up.
6. Traditional banking products
Savings accounts continue to be one of the safest forms of investment. The ROI may not be as high as other investment vehicles, but your money grows at a steady rate, and you don’t have a lot of money management to do.
Your main concern is the rate of inflation. A high-yield savings account can solve the issue of depreciating funds, but you can also use certificates of deposit (CODs) to tuck away your capital and achieve a higher growth rate.
CODs offer inflation-beating interest rates, but you have to keep in mind that there are penalties for early withdrawal. This is one of the best strategies for one to five-year investments, where you don’t mind locking away your funds for an extended period.