If you are a small business owner and you have made it through your first few years, congratulations! Now that you are making a steady profit and your business is stable, you may be thinking about investing. You might have heard that aggressive investing is the way to go. It is certainly an option, but here are some things you should know first.
You Must Tolerate Risk
Aggressive investing is popular because it generally has a higher rate of return. However, a higher rate of return also means a higher risk. The possibility of gaining high returns is matched only by the possibility of losing a lot, if not all, of your investment. You have to ask yourself if this is something you can tolerate. If you worry about losing money every day and cannot stand a volatile market, aggressive investing is not for you.
Think About Long Term
Aggressive investing is not for people looking to make a quick buck in a short amount of time. The high returns mentioned in the previous paragraph are generally over a long period of investing. There are a lot of fluctuations in the market from day-to-day. You have to be prepared to sit back and let your money grow over time. You will also need to consider your age and when you wish to retire. In general, aggressive investing is best for those that can leave their investments alone for a long time and give them time to grow.
Invest In Stocks And Mutual Funds
Aggressive investing usually means investing in stocks and mutual funds. These are the types of investments that have the greatest return over a long period of time. Make sure you spread your investments out over a number of different stocks and mutual funds. Do not put all your eggs in one basket. This is called diversification. Some brokers offer diversified portfolios with aggressive investing in mind. If you wish to retire soon or consider yourself a conservative investor, you should be looking at bonds. If you decide to do some aggressive investing, conduct further research on mutual funds.
Use A Broker
You are a small business owner. You do not have time to watch the market and look at every stock to decide where to invest. Consider using a broker for your aggressive investing. This removes any bias you may have to invest in your own industry. Think about your business. Would you trust an individual with no experience in your industry to run your business? Of course not! Then why would you trust yourself, a stranger to aggressive investing, to pick an investment portfolio? If you are ready for aggressive investing, you should be ready to speak to a broker.
Only Invest 10%…At First
This is an important piece of advice that we saved for last. You should only invest a little cash in the beginning. Consider 10% of your available cash for aggressive investing. Save the rest for a rainy day. You might need to replace a piece of manufacturing equipment or lose a vital staff member tomorrow. This could be infinitely more difficult if all your cash is tied up in an aggressive investing portfolio. Do not forget, with the volatility of the market you might lose money in the short term. It is in your best interests to save some cash for later. When you first start aggressive investing, start small with only 10% of your liquid capital.
Aggressive investing is a popular option for investors. However, there are some considerations a small business owner must take into account. Aversion to risk and a short term outlook are two things that are not compatible with aggressive investing. If you are contemplating aggressive investing, be sure to bookmark this post. Consider your financial needs before diving into the market.
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