Where to invest money?” – an eternal question, to which there is still no clear answer. Some people invest their savings in real estate, others – in the stock market. And someone decides to start their own business. Each option is good in its own way. In this article, we will compare two popular ways to generate passive income: investing in stocks and starting a business.
Business is suitable for whom?
Probably, everyone at least once thought about starting their own business. A business is created not only for the sake of making a profit. Entrepreneurship gives you the opportunity to discover your talents and do what you like. Athletes can open their own sports club, fashion lovers can open a clothing boutique, and fans of virtual games can open a computer club.
In addition, businesses are often set up by professionals who are tired of working for hire. Financiers are able to create their own financial organization, teachers – a private educational center, and beauty masters – a beauty salon. With this type of business, everything is clear. Entrepreneurship for them is a way of self-realization.
There is another type of entrepreneur as well. These are people who create a business with the aim of earning additional passive income. They do not know where to invest their free money and start their own business in the hope of receiving passive income. However, then the newly minted businessmen understand that investing in their own business is the most active income of all possible.
Setting up a store / finance company / training center and other businesses requires constant involvement. At first, an entrepreneur solves issues with documentation, hires employees and fully manages the process. Over time, of course, the owner can relax and delegate responsibilities to specialists. But until then, you have to work hard.
Thus, it is worth investing free money in a business for people who meet the following criteria.
- Have a lot of free time;
- Ready to put in the effort;
- The first time they can work in the negative.
Who is investing in the stock market for?
Those who think free money should work usually choose to invest in securities. Now you can’t surprise anyone with investments. This is an integral part of life.
If earlier millionaires or brilliant financiers proudly wore the status of an investor, now ordinary people with different financial levels trade on the stock market.
What unites them?
- Desire to receive passive income without leaving home;
- Readiness to take risks;
- They both do not want to waste a lot of time.
Business VS Shares
If you have not recognized yourself in the previous two points yet, turn your attention to the maximum. We will compare investing in the stock market and starting a business by various factors below.
There are some rumors that that trading on the stock exchange is very risky because you can lose all your money. As in any other area, be it rental, trading or manufacturing business, trading has its own risks.
Let’s remember what was happening on the market during the first outbreak of coronavirus. Business revenues plummeted. Some companies have suffered colossal losses. Many of them never recovered. Accordingly, a significant part of entrepreneurs lost not only profits, but also invested savings.
And investors stayed afloat. They received dividends from the bond and continued to receive them. And many were even able to multiply their capital several times. For example, at the beginning of the pandemic, the lucky investors were those who once bought Zoom shares. In addition, those who managed to buy shares when they fell significantly also succeeded in increasing profits. Also the traders could make a lot of money during shorts trading.
There is an unspoken rule in business. The larger, better and more relevant is the assortment, the faster the business develops. And, accordingly, the greater is the profit. In investment, this is called diversification. The money is distributed among various assets.
An entrepreneur must plan for many factors, from production to sales, as well as have a clear plan and process a large amount of information.
Investors don’t spend a lot of time and effort. But they also analyze the data and plan when and which asset to buy or sell. A competent investor always has a strategy that he or she adheres to. Apart from this, the investor also calculates the approximate return and risk.
An entrepreneur pays many different taxes. The investor has only one tax. All he or she has to do is click a button and get a brokerage report. At the same time, the investor does not need to waste time and fill out a whole pile of papers. The broker will do everything for him or her.
Businessmen should always be “in trend”. They need to follow trends and implement the latest innovations in their business.
Investors also must be included in the process. In trading, you also need to learn the methods of trading and analysis and monitor the emergence of new investment instruments.
But investors and traders, unlike entrepreneurs, do not waste time managing staff. You can manage your business remotely. But after a while and not always. And you can trade on the stock exchange from anywhere in the world: for this you only need the Internet and a smartphone.
Pros and cons of investing in the stock market are the following:
+ You can trade with a small amount;
+ Large selection of investment instruments (stocks, bonds, futures, options);
+ The ability to receive regular and stable payments — dividends;
– You need special knowledge to draw up an investment portfolio, carry out analyzes, forecasting, and so on.
– Relatively high risks (you can get a loss);
Pros and cons of business
+ You control the process yourself, directing your business in the right direction;
+ You can create a comfortable working environment for yourself;
+ The proud title of the leader;
+ There is no limit to earnings;
– Big risks. If there is a big problem, your business can crash;
– At the initial stage, you must spend a lot of time and effort;
– If the business is unstable, there will be financing problems;
– You may have to recycle a lot. And overtime is not paid;
– Are often in a state of uncertainty;
– You must be able to adapt to a rapidly changing situation;
– High responsibility for own income and earnings of employees;
– A wide range of responsibilities;
– If you have created a business incorrectly, you will work 16 hours a day, and not a business that has to work itself;
Thus, starting your own business is a good option for basic income. Starting your own business with the goal of earning passive income is an irrational idea. At first, you will have to work even more than at the main workplace. In addition, business requires financial, physical and emotional involvement. Expect to overwork, worry, and invest extra money.
Investing is easier. Of course, this process also requires the necessary skills and time. However, there are many ways for investors to ease or even automate your trading. For example, you can use online marketplaces like Dutch Rate, InGot or JustForex.
There will be only one conclusion: an entrepreneur can become an investor or combine both types of activity. He or she has all the necessary qualities, and many actions are well known to him or her. The main thing is to know about the possibilities of financial markets, then it will be clear how to use them to your advantage.
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