First post here, but been a Monzo user for a long while.
Just wanted everyone’s thoughts on why people invest in shares/stocks/startups (what are the advantages of investing?) over investing that same money in your own business? Do people who primarily invest are employees looking for a secondary income or do many small business owners themselves invest in shares etc of other companies?
From my own example… If I invest £50 in Marketing for my Education Consultancy business (at current scale) I typically would get approx £450 returned from that through the course of the year (subject to resources/time being available).
If I invested that same £50 in stocks that is barely making a dent on even reaching £100 over a few a years.
Seems like a no brainer to me? Any advice on why I would invest on stocks/shares/ new startups?
These are somewhat different. Your spending money on your business to generate more growth with the company, with shares your essentially buying part of a company for however long you hold them. This could be for the potential increase in share value or dividends.
Do what looks best for your particular situation. If money goes further by reinvesting it into your own business then do that, though as you point out you already see the limitations of this option, resources and time for the increase in business may limit how much you can actually put back into your business, so what do you do with the rest of the money?
It’s not a one or the other situation.
As @Eden points out, these are two completely difference scenarios.
I am not in a financial position to risk reducing my hours or for the set up costs to start my own business. I therefore put my savings into shares in order to gain better growth over a long time not to use it as income in the short term.
You have already got your setup costs/timings sorted to run your small business and therefore are looking to increase your work income by investing in your company.
Yeah these are two entirely difference concepts.
You should be using money generated by the business to grow and make more of a return within the business. But its business operational money.
Long term investing in stocks is a way to generate a personal passive income this video explains it quite well, but this is for your personal money, it shouldn’t be related to your business expenditures.
Thanks for the reply guys, helps clarify my approach a bit further with all very valid points. Will have a look through the video too now.
Would be very keen to hear from any other small business owners who have invested in stocks despite having room to grow in their own business.
It’s very rare that most businesses could just rapidly expand their bottom line through a cash investment without a strategy around that. And if they could they’d likely just cheaply borrow the money.