5 Effective Ways to Invest in Company’s Free Money
- Last Updated on: June 28th, 2019
- Posted by: Editor
- Category: Knowledge Base
Investment money can be a corporation, partnership business trust or limited liability company that pools money from investors on a collective basis. The money pooled is invested, and the investors share any profits and losses incurred by the company according to each investor’s interest in the company.
To invest is the allocation of money int the expectation of money. Making a steady profit and avoiding bankruptcy, by all means, is the main goal of any company. Here https://www.bestadvisor.com/bankruptcy-legal-forms you can read about bankruptcy from a legal point of view. We, in turn, hope that you will never encounter this situation, so we have prepared a short guide on how to use the company’s free money as efficiently as possible for the business.
Why You Should Not Keep Money in the Current Account of the Company
A current account is an account that is specially designed for business regular transactions. The most obvious minus from the accumulation of large sums in the account is the loss of profits. One of the laws of the market says that money should work. The thinking leader is unlikely to accumulate such funds, realizing that their inflation will devalue over time. For this reason, saving and multiplying funds means investing them. Below we list the most effective ways to invest free funds. Money should not be kept in the current account of the company because the applicable rate of interest earned on the available balance is really low in current accounts in companies. Secondly, the corporate business transaction usually takes a huge fee. And there is a limit to the amount of money you can withdraw in a day.
Where to Put the Company’s Consolidated Money?
The answer to this question that where should we put the companies consolidated money depends on the financial strategy of the company, and on the specific economic situation. Here is the list of some basic options.
This is the simplest and, at the same time, the most inefficient way. The company places money in the bank at a stable percentage. The advantages of a bank deposit include minimizing risks, easy access to money, easy returns on the bank account; the disadvantages include a small profit. It’s like a safe and secure place, where the money will be inviolable, and their number will not decrease.
There is a reverse option in relation to the deposit. P2P lending is when you lend money to someone at interest using a special online service, bypassing banks and other financial organizations. Service acts as a guarantor of the transaction and takes a small percentage.
This is beneficial to both the lender and the borrower. In P2P, Loan rates are always higher than deposit rates. Therefore, the lender receives a percentage higher than the bank, and the borrower borrows money at a rate lower than a bank loan.
Stock Market Investments
A stock market is an aggregation of buyers and sellers. The clear advantage of the stock market is the availability of short-term investments. If the available funds of the enterprise are temporary, the securities can bring in a more substantial and quicker income than a bank deposit, especially if the company can obtain good brokerage support.
Experts do not recommend investing 100% of available funds in securities. The best option is to invest in the stock market about 30-40% of free funds, and then monitor the situation. The stock market index is very sensitive to a variety of factors.
Cryptocurrencies – a Modern Trend
Cryptocurrencies can turn a small company into a global corporation and can make it bankrupt to the last penny. This is a bubble that can burst tomorrow, or it can hold out for another 10 years and enrich millions of people. In addition to bitcoin, there are many other cryptocurrencies in hundreds of numbers. Many of them have risen in price hundreds of times and enriched their owners. Investment in cryptocurrency is a profitable source of income for those who realize that classical methods of investment can no longer give high returns. However, this method has the highest risk of all listed.
Commercial or Residential Real Estate
This way is preferred by small enterprises. The cost of residential and office real estate is growing steadily by 20-30% per year and successfully covers inflation rates. Generally speaking, all the advantages and disadvantages of real estate for commercial use can be described in two words: it is profitable and troublesome. According to experts, this type of business is able to bring in owners 2-3 times more income than renting (or selling) residential premises.
Experts agree that it is best to buy such an object, which can be effectively leased or sold, even under adverse market conditions. However, in this case, there still will be difficulties with the return of funds. If it is necessary to sell the property, this procedure will take some time, and it will be impossible to receive the necessary amount promptly.
We have listed only the basic options, where to invest free money, but in fact, there are hundreds of them. In addition to the above, you can open another business, create a representative office of your main company in the virtual world, buy gold and diamonds, trade currencies, buy a historical or cultural artifact, and wait until its value increases several times. There is no accurate answer for all. The main strategy is to invest relatively small amounts in various ideas. Even if one of them turns out to be a failure, the next one will definitely be successful.