Are you an entrepreneur who could use a few suggestions about how to maximize ROI (return on investment)? Frequently, those who own small and medium-sized companies find themselves in the happy circumstance of not being cash-strapped. In other words, they succeed to the point that their entity has generated funds that can be invested. It’s instructive to examine some of the most common ways these owners invest their excess capital.
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Understandably, retail and other merchants typically prefer to buy additional assets for eventual sale, taking volume discounts when possible. Others park some of the capital in rental properties for appreciation in even the worst of economic times. Index funds, precious metals like gold and silver, and cash are a few of the other locations owners choose. Here are details about all the top ways entrepreneurs leverage the power of having excess money on hand.
Real Estate Rental Properties
The smart way to invest in real estate, especially if you’re an entrepreneur, is to build a tax strategy that doesn’t eat away at your potential gains. Of course, conventional IRAs and 401(k) accounts are the common go-to tactics for deferring taxes on long-term investments. Keep in mind that standard IRAs don’t allow account holders to add real estate to the mix of the portfolio.
The good news is that there are legal, profitable ways around that dilemma. What if you want to include high return real estate assets in your retirement account? Consider using a self-directed IRA to do so legally and safely. It’s a method that lets savvy business owners leverage the power of their cash to buy investment-grade real estate and place the assets directly into self-directed IRAs for maximum growth potential as well as deferred taxes.
Business Assets and Inventory
Growing businesses in competitive segments tend to need all the equipment, inventory, and other productive assets they can amass. That’s why so many owners with excess capital simply purchase additional assets or stock up on goods for resale. Technically speaking, inventory is not considered an investment. But, ask the owner of an e-commerce store that has trouble keeping up with demand, and they’ll be happy to point out that there’s no more helpful way to use cash on hand.
Funds that track entire exchanges, like the Dow, S&P 500, or the UK’s FTSE are popular among the entrepreneurial class. One reason so many owners opt for index funds is the built-in diversification. Not only do most such funds make it simple to invest, but they also represent a worthwhile parking spot for otherwise idle sums of money. Businesses, institutions, and governments around the world own varying amounts of index shares as a way to trade the entire market and offset more volatile price swings of individual stocks and other securities.
Many company owners, founders, and financial controllers choose to keep a small portion of their investment portfolios in gold and silver. Some prefer to diversify within the precious metals sector by owning platinum and palladium as well. However, even ardent believers in the huge upside potential of precious metals tend to limit their total portfolio ownership of metals to no more than five percent.