Many business owners already invest as individuals but require clarity on how to invest as a business. To invest as a business, you need to focus on a different set of priorities. Also, be very clear on the business’s long-term goals and objectives.
Business stakeholders should answer varied types of questions before taking on investment opportunities. This article answers one of those questions…
Can you invest your business money in stocks?
The direct answer to this question will be “no”. You should not invest your business cash in stocks and here’s why.
As shared in this article, stocks are assets that involve higher risk than other types of investments. They can increase or decrease in price at any time – depending on the perceived value of the stock.
Therefore, investing business funds in stocks is risky. The best way is to invest for the long term and divide your funds into different risk categories – low and high risk.
A stock represents owning a part or fraction of a company in relation to the total equity of the company.
The correct way to allocate your business money
If your business has a large amount in cash reserves, you may decide to spread the funds into low and high-risk investments. For example, 80% of the funds can be invested in low risk while 20% is invested in assets with higher risk.
However, the points below will help you with allocating your funds, if at all you can invest in stocks:
- The type of business you run and your long-term goals
- The regulations, policies and restrictions placed on your type of business
- If your business is solely owned by you or has other stakeholders and investors
Essentially, you should not decide to invest your business money in stocks based on just emotions or on how the market is performing. In many cases, you may require the help of a qualified financial advisor before making a decision.
It is important to note that in cases where you can invest in stocks, only a small portion of your cash reserves should be invested. It remains a high-risk asset and as a business, capital preservation should always be a priority.
Watch this video for more info on balancing and rebalancing investment portfolios as an individual.
So, is stock a bad investment option?
No, stocks are not a bad investment option. Once you’ve taken into consideration the policies and regulations that govern your business, you can take advantage of stocks.
Many individual investors enjoy considerable capital growth when they invest in them and your business can too. However, it can not be overemphasised that businesses usually require low-risk and more liquid investment options.
Stocks might not be the best investment type when you’re just starting out with investing as a business.
What’s the better option?
With Sprout, all the investment options you’re shown are low risk. You also enjoy great returns, and easy liquidity – all without long queues or forms. It takes just about 5 minutes to get started from the comfort of your home or office. All you need are a few business papers.
Sprout gives you access to:
- Investment options that prioritize capital preservation and returns
- A transparent easy-to-use dashboard that shows all your transactions
- Trouble-free liquidity that takes effect in a maximum of 42 hours
Why choose rigid, risky or unsafe investment options for your business when you can access more suitable options on Sprout?
Visit cowrywise.com/sprout to put your business cash to work now.