When running a business, one of the main goals is growth. Growth can require time, effort and most importantly, money. Any way in which a company can increase their cashflow and invest back into the business, can lead to positive growth. Of course, many do this by increasing sales, reducing costs or maybe even taking out business loans. However, one method that can often be overlooked is investment. With the right strategy and a cautious approach, businesses can achieve a steady flow of income through investment. With this in mind, how can business owners take advantage of smart investment strategies?
What is investment?
Any way in which you can make your money work harder for you, is beneficial. Many opt to do this with savings accounts, accruing a small but regular amount of interest. However, investment allows for larger returns but with greater risks. You can invest in almost anything but when we talk about investment, we often think of stocks and shares. The stock market can offer a healthy return on investment but there are some caveats to keep in mind. Success isn’t guaranteed but with the right approach, you can create a whole new revenue stream.
Risk vs Payoff
When deciding where to invest, one of the main considerations is risk. Some investments can lead to larger returns but they can also come with substantial risk.
High risk investments have the potential to provide a greater return, in a relatively short timeframe but there’s also a greater chance that you could lose your money. This can be due to a number of reasons- a volatile market, sudden changes such as fluctations in interest rates or inflation, as well as other external factors. An example of a high-risk investment, would be investing in an individual stock or share.
Low risk investments are more reliable but your return will be smaller and take longer to get to you. An example of a low-risk investment would be a fund, in which lots of smaller investments are made across multiple stocks and shares- therefore, spreading the risk.
Whereas individuals may be more tempted by high-risk, high-return investments, business owners should remain cautious. Therefore, a long-term approach in which smaller, more stable investments lead to a steady but slow return, is a more attractive option for those with companies to look after.
With this in mind, cautious business owners often opt for investment within funds, rather than the danger of individual stocks and shares.
Taxes
Any way in which you can make your money more efficient is a bonus and there are ways to make tax savings when investing. Everyone in the UK has a yearly ISA allowance of £20,000. Those looking to make investments should look no further than a stocks and shares ISA. This allows individuals to put up to £20,000 into an ISA account which can be invested in stocks, shares, bonds and funds. The best part is that any gains or income which is made from these investments, are free of income tax, capital gains tax and dividends tax.
Investment may seem complicated at first, particularly for beginners but it offers a whole new revenue stream for those looking to make more money. When it comes to business owners, increasing cashflow can mean the difference between success and failure. Therefore, the potential benefits of investment should not be ignored.
Fortunately, there are financial experts available who can help any business owner looking to start investing. The team at Taxation Investigation provide comprehensive financial services, including expert advice on investment strategies.
