6 Reasons Why Every Entrepreneur Should Invest in the Stock Market
By definition, making money is one of the primary objectives of any entrepreneur, and there are several ways you can do this, including working your way up the corporate ladder, building a successful business and buying and flipping property.
However, if done in a savvy and strategic way, investing in the stock market could potentially be the most lucrative method of all to generate significant wealth.
To be successful, it would help if you worked with an experienced broker, such as HALO Technologies and gained a good understanding of the way the ASX works.
It would also be handy if you had access to a bit of disposable income, were prepared to take an educated risk or two and had a firm investment goal in mind.
While achieving this might require embarking on a steep learning curve, isn’t that what entrepreneurship is about?
So, why not channel your inner Warren Buffett, Bill Ackman and Cathie Wood and dive into the potentially profitable waters of the stock market?
Here are six reasons why you should consider doing just that.
1. Another income stream
What makes investing in stocks and shares so appealing to many entrepreneurs is that it provides them with another potential income stream on top of their main ecommerce or business interests.
The great thing about stocks and shares is that you can ‘set and forget’ them. In other words, just invest regular amounts and let the market take care of the rest while you focus on other aspects of your entrepreneurial portfolio.
That said, you can also take a more proactive approach and try to grow the investments through savvy buying and selling. Either way, you are still making money in an additional manner than you previously would not have been.
2. More Financial Freedom in Retirement
Wouldn’t it be great to retire at 55 and live a life of leisure?
Well, if you invest wisely and regularly in stocks and shares from as young an age as possible, this could be a distinct possibility.
For example, if you are currently 30 years old and can invest $200 a week in stocks and shares for 25 years (with an initial deposit of $2000), that nest egg could be worth around $780,000 by the time you reach 55 years old.
If you are able to fund $1030 a week over that timeframe, and from that initial base, you’d have over $1 million worth of equity – just through the regular transfer of money from your bank account to your cash management (investment) account.
3. Diversify your portfolio
It’s always good for entrepreneurs to diversify their business and wealth generation interests because it reduces the levels of risk they place on them.
The more channels you can set up for income generation, the better, as it means you will not have to rely too heavily on any given one of them.
The key to diversifying your portfolio with stocks and shares is to understand what role they will play in your overall wealth generation plan. The more prominent the role they play, the more you will have to manage your ownership of them.
4. A More Profitable Way of Saving
You might not think this, but if you pick the right stocks and shares, they can actually serve as a better way to save money in the short term, as opposed to savings in the bank.
Typically, banks do not offer more than 5% interest on your savings, which means you’ll only make a limited amount of money if you keep it in one of those accounts.
By contrast, shares have the potential to increase by a lot more than that – assuming they are successful.
So, even if you keep them for only a year or two before cashing in on them, this can be a more profitable tactic.
Of course, the value could go down in that time as well, so you will need to determine whether this is a risk you want to take.
5. Extra Emergency Fund
As well as being an extra potential platform for your savings, your portfolio of stocks and shares can also be used as an extra emergency fund.
It is a good idea to have a bank account with a certain amount of money as a buffer that you can draw upon when you need it.
However, you can also use your securities as a backup to this buffer, just in case you hit really hard times and need to access most of that fund.
6. Invest in your children’s future
You are not going to be around forever. So, if you have children, investing in stocks and shares is an excellent way to safeguard their future after you have passed away.
Any shares bought now would be worth significantly more in 40 to 50 years when your children might be close to retirement age – or have children of their own who you might want to be beneficiaries.
If you were to invest in the future of your children and grandchildren in this way (which you could potentially do via a trust) you will go a long way towards setting them up for later in life and leaving behind a cherished legacy.