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A Small-Business Owner’s Guide To Investing in Stocks

Published: 08/12/2022

If you own a business and want to diversify your assets by investing in stocks, today’s online brokerages make trading fairly easy. However, stock investing is risky, especially in a volatile market. Here are four key considerations small-business owners should make before investing.

Understand Why You Want To Invest

Investing may make sense for non-business owners, particularly those who do not have a pension. By investing for retirement, individuals may enjoy the benefits of compounding interest and investment returns over a long time.

For business owners, the considerations are more complex. Businesses have many demands on their working capital. Using these funds to make investments–instead of using them for inventory, payroll expenses, or expansion–may have a significant opportunity cost. Before investing business funds, consider both your goals and your available capital to ensure that investing is an efficient use of your working capital.

Determine Your Strategy

There are nearly as many investment strategies as there are investments themselves. Some businesses may want to invest in new technologies like electric vehicles. Others may prefer bond funds as a possible source of relative stability in a volatile market.

Your investment strategy should reflect these factors:

  • Your investment time horizon
  • Your risk tolerance
  • Your non-business investments
  • Your business’s cash flow and tax liability
  • Your business’s legal structure

Your team at Planned Financial Services can help you evaluate your circumstances and design an investment strategy that reflects them.

Find a Business Stock Broker

A financial professional may work with a broker to assist you in trading stocks, analyzing your portfolio’s performance, and working towards making your investments tax-efficient. Our professionals typically do not recommend combining business investments with personal investments. Rather, we recommend business investors maintain separate business brokerage accounts in order to avoid potential tax or legal complications.

Evaluate and Adjust Your Strategy Over Time

We recommend regularly evaluating the business strategy unless your plan is to hold on to investments for a long time. You may consider adjusting the financial plan as circumstances dictate. It is possible that over time, some investments may outpace others, which could skew your desired asset allocation. In general, you may consider selling higher-performing assets in order to rebalance the portfolio in a potential situation like this.

 Talking with an appropriate representative at Planned Financial Services (or your financial advisor) could serve as a good sounding board when it comes to providing investment advice and financial planning.


Important Disclosures

Investment advice offered through Planned Financial Services, a Registered Investment Advisor.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

Investing involves risks including possible loss of principal.  No investment strategy or risk management technique can guarantee return or eliminate risk in all market environments.

Rebalancing a portfolio may cause investors to incur tax liabilities and/or transaction costs and does not assure a profit or protect against a loss.

This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.

This article was prepared by WriterAccess.

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