Five Investment Strategies of Start-ups
30

Oct 2020

There is an old saying that money attracts money. This means that in order to make more money, a person will have to invest some money.  The concept of spending money has been replaced by the concept of Investment. The basic difference between Spending money and Investment is that on investment, you are guaranteed some benefit, whereas spending money means just blowing through money without any consideration in return.

The meaning of an investment strategy is discussed below.

What is Investment Strategy?

when a person or an entity has a lot of money which it wants to use so that instead of just resting, the money works for the person or entity and generates some kind of revenue. It is recommended to prepare some kind of strategy before delving into the world of Investments.

It is not easy for anybody to invest a sum of money as there are a lot of requirements for investment. The entity not only requires to have access to a substantial amount of money, but it also requires to have a fixed goal, an estimation of the future as well as some risk tolerance. Investing money can substantially increase your funds, but if even one of the decisions taken by you gets wrong, the idea of investment can go south pretty fast.

This is why there are certain strategies that are followed in the case of investment, which fulfills certain goals and agendas of the person. Each of the Investment Strategy focuses on a different agenda.

Some of the investment strategies which are being used by Start-ups are as follows:

1.Balance Your Financial Plan.

If you are investing for the first time or you are a seasoned expert, you should refer to keep a balance while investing. This means that there should be an adequate investment risk, which will bring in a reasonable pay-out. A balance between the risk and the pay-out will help the entity to be grounded, and even if an investment does not work out, the investment will not affect the entity much.

2.Start Investment as Soon as Possible.

The sooner one starts investing, the more the rewards one is able to reap. This is mostly due to the effects of compound investments. Compound Investments can be explained using an example.

Suppose you are investing 100 $ every year starting from year 20. Then by year 40, the person would have invested an amount of $2,000 (20 * 100). Let this be the situation, “A.”

In the second situation, all the parameters are the same, but there is one change. The person starts investing from the age of 15 till the age of 40.

We can see that there has been a straight increase of 5 years in which the person has invested 500$ more.  Thus it is preferable if the investment is started from a younger age and as soon as possible.

3.Only Invest in Things You Understand.

One of the rookie mistakes that any entity makes is that it starts investing in commodities whose workings are not completely understood by the entity. For e.g., If you are dealing with the sanitizer business, now there is a huge scope for the business in the current market, but if the same entity had invested in the sanitizer market a year back, it would not have funded this much demand all over the world.

This means that one should understand the need and why is there a requirement of the commodity and then accordingly invest in the business.

4.Do Not Take Investment Decisions Emotionally.

Making an investment decision needs to be purely from an intellectual standpoint. It is a common saying that emotional life and professional life should be kept apart, and this is applicable while making investments.

5.The Increase in Risk Does Not Always Mean More Profit.

We all know that the more the risk, the greater is the reward, but this is not always true. Yes, a greater risk can sometimes guarantee a greater reward, but if the risk is taken should be calculated and should be worth the risk is taken. The investor should know what it is getting into, and is it worth it. A properly planned decision should be made before making any decision.

Investment decisions, especially for a start-up, can be very difficult as they have to look into the past, present, and future of the company. this is why it is recommended that a business should take the assistance of reputed and professional Accounting and Auditing Firm.

If you are looking for such a firm for your company in the United Arab Emirates, then You can have a look at the services provided by JAXA Chartered Accountants. The experts at JAXA will take care of all the requirements of your company and will help in the growth of the business.

To know more about the services provided by JAXA, Contact Us. We will be happy to help.