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View Your Investments as you Would a Business

A Guest Post today –

Treating your investments as anything less than a business is a mistake. Following advice of your broker isn’t always bad, but just like in business you should see a return on your investments and most brokers have interests that might not align with yours. If you have found yourself losing money, then you aren’t investing, you’re spending. Just like any business venture it’s essential to understand what brings success and success in the investing game is all about ROI.

A business cannot take major losses, and remain a business for long. Why would you be any different when investing your money? Brokers still get paid when you lose money, so excuses like “everyone’s losing money” or “it’s a bad market” are just that… excuses.

In business, having an employee consists of being able to utilize that employee in the most efficient way possible in order to maximize your return on investment. Think of your broker as an employee–can you afford him? I am sure that firing your broker isn’t what you want to do, but just like in business you can’t spend money if you aren’t making any.

Stocks are Products

Running a business comes from selling either a service or a product. In the personal investing side of things, it runs the same way. You buy and sell products (stocks) – in this case pieces of a company – in order to maximize the return on your money. Having a weak link, such as a bad broker or a computer that can’t keep up with the current trading software is costing you money, just like a bad employee would in a small business.

You Need a Plan

Every good company started with a solid business plan and every solid investment portfolio should utilize a plan as well. A business plan involves promotion, whether in the form of business cards, t-shirts or see these promotional products, a Nashville, TN company has to offer. Stock portfolios are essentially the same, only instead of promoting your business you are doing your best to promote your portfolio to hungry investors that’ll buy these stocks and make you some money in the process.

Set Goals

Another piece of the plan is goal setting. Make a list of things you want to accomplish. At what age would you like to retire? How much debt do you have and at what point does it need to be paid off? Which financial wants and needs are a priority?

Once you have solid goals, you can begin to calculate what needs to happen to get you there. For example, on a 7-percent annual return, do you need to invest 15-percent of your salary each year, or could you get there with 10-percent and wait to reap the rewards for another couple of years. Financial planners are great assets when trying to decide on your short and long-term goals, and they should be utilized unless you are an experienced and savvy investor.

Build a Team

Every business needs a good team to function. When investing, your team is essentially yourself, an accountant, a broker, and a financial advisor or consultant. The accountant is the easiest to justify a return on, as they keep you on track and help you navigate tricky tax codes and deal with capital gains. If you have previously experienced losses, he will help you to apply them over the next few years, thus saving you money right away. The broker isn’t going to show you a huge return (even with their “hot” tips), but they are a necessary evil unless you do 100-percent of your trading online.0

Now, the advisor or consultant is probably the easiest to calculate a return on. If you are solely relying on their advice, it’s pretty simple to calculate your annual returns, thus calculating the ROI from that team member should be a breeze.

Successful investors treat their portfolio as a business. They plan, they strive to make sound decisions and every dollar put in has to generate a return – not unlike a small business. Treat your investments as a product and get out there and start generating a return.

 

 

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