As an entrepreneur, many of your day-to-day decisions are based on finances. After all, you must ensure that your costs are at a minimum and the revenue / ROI is as high as possible. You also have to pick the right investments that can contribute to the growth of your business. For instance, you may wonder if it’s better to buy stocks or keep your money in your savings account. In reality, you have a whole range of options:
1. Government Bonds
Government bonds are issued at state, municipal, and federal levels. The safest, in general, are the federal bonds as the cities and states can potentially run into financial mismanagement.
You can hold the government bonds in funds as well as target-date retirement funds. Also, T-Bills and Certificate of Deposits (CDs) don’t offer a high-interest rate but there are some government bonds that do offer good ROI.
2. Cryptocurrency
Cryptocurrencies like Bitcoin and Litecoin have led to the rise of new technologies and also given a new meaning to digital transactions. This is why millions of investors around the world have invested in popular virtual currencies to earn huge returns. As the IPO is known as the initial public offering for stocks, ICO is known as the initial coin offering. Sometimes, getting in at the ICO level, one can buy crypto for less than pennies, only for the cryptocurrency to skyrocket to a few dollars a coin, turning an initial investment of just a few dollars into a few hundred dollars or more!
Cryptocurrencies are certainly one of the most innovative ideas for investing for individuals, especially those with an entrepreneurial spirit. Be warned, as innovative as crypto might be, it is also just as, if not more so, volatile. Allocating some of your funds to cryptocurrency investment after studying the performance history of different options might be something worth exploring if you can afford to lose the investment. Like most investments, don’t gamble what you can’t afford to lose.
3. Savings Account
A savings account is not one of the fastest-growing investment options for an entrepreneur, but it might be the safest. However, it can be fast-growing with the help of the right product like Wealthfront, for instance.
In this Wealthfront cash account review, learn why Wealthfront is a much better alternative to traditional savings accounts. Traditional savings accounts usually offer an APY of 0.01% to 0.10%, while Wealthfront offers an APY of 2.57%!
4. Common Stock and Preferred Stock
Common stocks are quite popular among general investors but they can also be used by experienced investors and entrepreneurs. Even though they are more volatile than a savings account and even bonds, they usually offer around 10% returns per year if you study and pick the right options.
Preferred stock is a combination of bond and common stock. As an investor, you receive assured payments after each quarter, much akin to bonds, but there is no expiration/maturation date on the investment.
Tips for Sound Investments
It is important to remember that all investment products have their pros and cons; it’s up to you how you set up your portfolio. If you want to benefit from maximum returns, then the following are a few tips you might want to keep in mind:
- Prepare an investment strategy– assess the funds you have today, how much you are willing to invest every month, and how much returns you want to earn within a certain period
- Don’t put all your eggs in the same basket. Learn how you can diversify your investments to control the risks
- Follow 50/30/20 rule in which 50% of your income should be spent on your important expenses, 30% for flexible expenses, and 20% on investments and savings
A smart investor is the one who does their homework and invests their money only after learning about the risks and benefits of different products. So, be sure that you take your time and compare all the options to create a strong portfolio.
