Want to start investing in stocks (or options, futures, or other related products)? Well, the good news is that you can do so with just a few clicks. Thanks to online brokers, you can start trading within minutes.
Of course, if you want to do things right, there are a few things you should do first (and after). After all, you want to maximize your chances of making a profit on the stock market.
So let’s talk through each step of the investment process and get you started on the right foot.
We know you’re eager to start buying stock, but we urge you not to skip this step. Before you get started trading on the stock exchange, you need to make sure that investing is the best choice for you and your business.
For individuals, investing is often a no-brainer. The stock market often gives better returns than simply sticking your money in a savings account, at least in the long term. And even if you’re not interested in actively managing your portfolio, retirement accounts like your 401(k) and Roth IRA mean you likely have some kind of money on the stock market.
But for businesses, the math isn’t so simple. For one, businesses usually have plenty of other ways they can effectively spend money. Instead of becoming an investor with business funds, you could use that money to buy more inventory, to upgrade your equipment, to hire more employees―you get the idea. The point is, you can spend your money in a way that affects your bottom line and the likelihood that your business will still be around in a few years.
Which brings us to the next point: the stock market usually works better as a long-term investment strategy. As you’ve probably noticed, the stock market has its ups and downs. Some years, you’ll probably lose money. But over time, those ups and down balance out to give an average return between 4% and 10%, depending on who you ask. The “over time” bit is key, though.
For individuals, that’s no problem. Most of us plan on being around for many years to come, so we can reap the sweet benefits of long-term returns. Businesses, though, tend to have shorter lifespans than people. In 10 years, you could have retired or sold your business, meaning your business never gets the long-term benefits of investment.
And we probably don’t need to remind you of how many small-businesses fail in a 10-year period (too many). So you need to decide what will give your business a leg up during those 10 years: squirreling away money in the stock market or making regular investments in the business's strategy and operations.
In the end, only you have the answer. You know your business and its needs far better than we ever could.
So if you really think you want to become a business investor, we’re here to help. The remaining steps below will help guide you on that journey.
But if you’re having second thoughts, then you might want to consider doing something else with your business’s money. For example, high-yield savings accounts for businesses offer some returns on your cash, but they’re less risky and more liquid than the stock market.
With that word of caution out of the way, let’s talk about what happens next in the investing process.