For most business owners, financial security and profits are directly tied to the products or services they sell. But what many business owners don’t realize is that owning stock is important, too. That’s because this can be another way to enhance profit margins and even provide financial backup should you need to take out a loan.
Owning stocks can be a great way to increase the amount of money you are earning as well as provide some diversification to your financial portfolio. Truly, anyone can begin their journey to a safer and stronger future by investing in stocks. Here are four of the most important reasons why you should invest in stocks.
1. Owning Stock Is a Quick Path to Liquidity
One of the most satisfying aspects of owning stocks is the ability to make money—or borrow it. Perhaps you want to be safe and slowly grow money by investing in a stable company. Alternatively, you could day trade and possibly earn big returns on volatile fast-growing companies. Additionally, there are numerous other options for investing.
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These different techniques allow anyone to quickly gain liquidity and use it as they please. With access to liquidity, you can invest funds back into your business. In short, owning stock is a fantastic way to add power to your financial situation. This is because it can allow you to quickly make cash available to your company.
Beyond the profits from the stock itself, you can also borrow against the value of the stock you own. Rather than using personal collateral to finance your business ventures, you can seek out forms of securities lending.
2. Owning Stock Is a Hedge Against Inflation
A crucial part of owning stock is keeping up with the world around you. In the past decade, the United States’ average annual inflation rate has come in as high as 3.4%. However, a healthy stock portfolio can average growth of 10% in a year.
Although the slow growth of a stock portfolio may seem like a small return on investment, any growth is important when considering that inflation is devaluing money that is not working for you. Without investing, money outside of a bank loses value every year, while money in a bank can only return a small percentage of the money you are losing annually.
The solution? Invest in safe, measured businesses that will grow at a rate to beat inflation.
3. Stock Holdings Are Easy to Manage
One of the best attributes of owning stocks is that you can buy and sell them almost instantly. This is because most exchanges allow traders to buy and sell at any time. This allows people to quickly turn any earnings they make in an investment into cash. This is important, because at any point an investor can liquefy their stocks and move on to the next opportunity.
Additionally, stocks are incredibly easy to buy. Once you are set up on a website or exchange, you can research and buy stocks within minutes. In other words, owning stock is a fairly simple activity that doesn’t require too much time. You could even trade during a lunch break!
4. Owning Stocks Allows for Diversification
A diverse financial portfolio is a key to success. Without options, any change in your financial situation can be devastating. Diversification gives you the ability to maintain stability if some untoward event such as a crash should occur in a bank or market.
A mature and safe approach to the future involves the understanding that things can and do happen that are outside of your control. However, with a little forethought you can protect yourself from these situations by owning stocks. This allows you to diversify into different companies or forms of investment
The Bottom Line
Owning stocks can elevate anyone’s financial situation. For business owners, owning stocks can do more than improve a personal financial situation—they can be a key part of the company’s growth and financial success.
So when considering the future of your business, take it to the next level by owning stock and using stock loans to your advantage.