- December 8, 2016
- Posted by: Smith & Smith
- Category: Blog, Investment
Keeping your cool is perhaps one of the best advices in the business world. This is especially true for investments as an equity shareholder. However, there are a lot of risks involved, which is why keeping your cool is important. If you have a solid accounting team managing your finances, you can make informed decisions for smart investing. Let’s find out how you can use accounting information to your benefit.
Investments to consider
As an equity shareholder, you can either invest in any kind of business. It does not necessarily have to be a large, established company.
- Invest in a startup business to get lucrative profits when it grows.
- Invest in publicly traded securities where your investment is exchanged with the seller of the established stocks. A stock broker can help you with the process, for a fee.
- Invest in the primary capital market where your investment goes directly to the business in question. Crowdfunding over the internet uses this method and has become very popular.
Invest in mutual funds, exchange traded funds, unit investment trusts for lucrative returns.
No matter where you invest, you need complete understanding of your finances. Trading in public securities, you can refer to your stock broker for details on which ones might reel in a profit. Startups and crowdfunding investments are higher in risk as you have little idea as to how they might pan out. Use your reasoning based on the company details as well as your financial standing before going through with it.
Things to consider
Typically, the conditions that affect a business will also affect your investment. Remember, the business is obligated to keep you updated on their finances throughout. Keep an eye out for:
- Industry trends and problems
- National economic and political developments
- Threatened action by regulatory agencies against the business
- Possible mergers, friendly acquisitions, and hostile takeovers
- Turnover of key executives
- Labor problems
- International markets and currency exchange ratios
- Supply shortages
- Product surpluses
These areas will give you all the telltale signs of how a business is progressing. It will help you determine if your investments was a success.
Business is fickle, and you need to be ready for the bad times as well as the good ones. There is a way to predict the success of a business. You have to read up on all their financial reports that detail their finances. Some reports will also include a financial projection that will predict the expenses, income, and profit for the coming year. These will give you an idea whether you should sell your shares now or wait for a while and sell when you have a sizable profit. But beware, waiting too long can leave you in a rut and you will be forced to sell at a loss.
For more information on this topic, or to learn how Smith & Smith CPA’s tax specialists can help, contact our team.