There’s No Hurry
If you’ve been in business for a while and have accumulated decent cash reserves…
…you may feel compelled to invest it right now, to make it start working for you.
That’s a great instinct to have, but if you don’t know what to invest in or how or when, the best advice is: don’t.
Your cash may not be earning you much interest in a savings account, but at least you’re not losing money—a distinct possibility when you jump to invest without really knowing what you’re doing or why.
It’d be far better to hold on to your money and build up your reserves so that you can confidently invest when the opportunity arises.
What to Invest In
I would not even begin to suggest where a person should invest his or her money and I look at anyone suspiciously who asserts the wisdom or value of a particular investment.
For instance, in August 2000, Fortune magazine picked its, “10 Stocks to Last the Decade.” By December 2012, anyone who had invested in this particular portfolio would have lost 74% of his or her investment, according to Barry Ritholtz of Ritholtz Wealth Management.
You will read and hear a lot about this or that great investment or investment strategy—on TV, the web, friends, and even paid financial advisors—but the only great investments are the ones that you personally understand well enough to have some degree of judgment about.
So, before you invest in anything, educate yourself. Read about the various asset classes: equities, commodities, real estate, startups and their many variations.
It’s likely that one of these will appeal to you more so than the rest. I would always suggest moving in the direction of what appeals most to you.
When to Invest
When you have money to invest and a sufficient understanding about the asset class(es) you want to invest in, then it’s just a matter of finding the right opportunity.
The right opportunity isn’t always based on a tip about “a hot tech startup” or “a hot growth stock.” More often the opportunity comes from understanding your own tolerance for risk and finding a niche in your preferred asset class where you’re comfortable putting your money.
The ability to recognize an opportunity comes only with understanding.
For instance, let’s say that you decide you like the idea of investing in the stock market. There is a lot of latitude there.
On one extreme, there are people who invest in an index fund or a portfolio of indices for the long haul (at least five years, but usually decades).
They are looking for a predictable and acceptable return on their money and are not interested in analyzing individual stocks. With an index fund, they invest in a diversified range of industries and stocks.
It’s a passive and low-risk kind of investing.
There are others who invest in specific stocks for shorter periods because they are able to recognize when a stock is most likely headed for a significant rise or fall.
This kind of investor wants the geometric growth that some stocks can provide.
This kind of investing is riskier and more active.
When you start to investigate and learn, you will discover that these extremes (long-term vs. short-term, active vs. passive) and everything in-between exist in all asset classes.
To sum it all up, don’t feel pressured to do something with your money if you really don’t know what to do with it.
Invest in opportunities that you understand.
You will develop the ability to recognize such opportunities only by studying asset class(es) that appeal to you and determining your own tolerance for risk.
If you are just starting out on your entrepreneurial journey and actively looking for a business that will help you achieve all that you desire then watch the video below…
Many thanks to MOBE for this excellent content curation and use of their images