Should You Start A Business Or Invest In The Stock Market?
Do you dream of traveling, affording the life you want, and taking care of your family? One sure way of ensuring financial stability is by investing in multiple income streams.
Starting a business and trading on the stock market are two great options, but given your situation, what should be your ideal choice? In this article, we’ll help you sort through the noise by providing salient questions to consider before making a choice and investing. Here’s a list:
- What’s your money goal?
- What’s your risk appetite?
- How much time do you dedicate?
- Do you have the capital?
What’s Your Money Goal?
The primary reason for starting a business or investing in anything is to increase your income. But not everyone is at the same level of financial stability.
One might be starting in life and doesn’t have a job but is looking for something to start with. Another person may already have a job and needs to increase their income actively or passively. And there would be others who are unhappy with their current job and would like to earn money some other way.
Each of them has a different money goal. Whether it’s immediate cash or future returns. The key factor to remember here is that becoming an entrepreneur with your own business and investing in the stock market serve two different purposes.
Owning a business is considered active income requiring your time and energy to ensure it’s running smoothly. And investing in the stock market is passive income where your money works for you with enough knowledge. Both have different earning potentials.
As we progress in this article, consider your current situation, what goes into starting a business, and what you’ll need to do to invest in the stock market successfully.
What’s Your Risk Appetite?
Whether buying stocks or investing money in starting a business, you could lose money thanks to mistakes, fate, or government sanctions. In addition, when you start a business, your money gets tied down while trying to break even, and you may not have enough liquid cash to sort emergencies or bills immediately.
But of course, there are ways around it. Whether your money is on lockdown or if you immediately start making profits would depend on the type of business you choose and the business model you adopt. Dropshipping, for example, is nearly a low-risk business.
With drop shipping, you wouldn’t need to rent a store or pay electricity bills. It’s a business model where your supplier ships directly to your customers, and you get to keep every dollar earned in profits. The risk here is if your supplier ships defective products resulting in you refunding customers out of pocket and even incurring losses.
The risk is similar to investing in the stock market. A company’s stock prices can tank, dragging your investment long before you can take out your capital or profits. Then, with the snap of an arrow, all your money will go down the drain.
How Much Time Can You Dedicate?
Think about how much free time you dedicate to your financial goal. With stock market investing, you decide how much time you want to spend monitoring the market and even create a system where all the information can be accessed in a short time.
What you need most when investing in stocks is knowledge. How much knowledge you have about trading on the stock market determines your returns and how much time you spend on that activity.
With enough knowledge, you don’t have to keep your eyes on the charts 24/7. But if you’re ignorant of how the market moves, price forecasting, and industry news, you’ll spend more time looking at the numbers and hoping on vibes that the prices stay up.
As a brick-and-mortar business owner, your responsibilities demand your time. You can’t pick up and leave the business at work like an employee. The business is your sole responsibility; you must bear every profit, loss, and credit for growth.
The only time you’ll have more freedom is when profits start rolling in, and you employ hands you can delegate tasks to. But, even then, you would still need to keep your eyes on your investment all the time.
Do You Have Startup Capital?
This is another question that determines how you make your decision before investing. The early stages of a new business are categorized by startup capital tied down for a good while. Capital might be a few thousand dollars or hundreds of thousands depending on your business idea.
Your business may not make sales immediately, so can you foot the bills till this new baby can run without help? How will you cope with taxes and salaries? If you intend to take out a loan, what’s your plan for paying it back?
Stock market investors may have better luck with investing affordable capital. Years ago, you couldn’t invest in stocks unless you had a large amount, but now, you can buy any company share for as low as $10.
You don’t even need to pay a broker anymore. By investing through stock trading platforms, you’ll have total control of how you invest and when you can take out your money. Most of these trading platforms have affordable fees, while others have higher fees and premium services.
We’ve explained that investing in the stock and starting a business comes with considerable risks and requires time, knowledge, and capital. Therefore, the best option is the one that’s affordable for you, suits your risk appetite, fits your schedule, and one you possess good knowledge in.
But don’t stop here. Do more research on investing in the stock market or starting a business. Trust your guts and the facts, and you’ll be on your way to making the right financial decision for yourself and your future.