Traditionally, putting money away in savings offered a degree of financial security for most people. However, the interest gained on savings hasn’t been significant for many years and money in savings can be seen to just ‘sit there’.
So, shrewd individuals looking for ways to make their money work for them started to invest. Deciding to invest can be an effective way to increase the value of your money but there are factors to consider before you do. Here, we will look at why start-up businesses can be a good opportunity.
Ways To Invest
One of the more traditional ways to potentially grow your capital would be to invest your money in established businesses or the stock market. The world of investments is changing all the time and today there are different ways you can consider investing your money.
New investments could be things like cryptocurrency and digital assets, non-fungible tokens, AI and even space technology. Whatever your interests and areas of expertise might be there is one thing that can have a big impact on your investment portfolio: start-ups.
Why Invest In Start-Ups?
Early-stage businesses are often the frontrunners of innovation and technology and they can offer investors an exciting journey to be a part of. Although investing in start-ups typically carries higher risks than other investments the potential returns can be substantial.
Not only that, investing in early-stage enterprises can increase the diversity of your portfolio which in turn can help to mitigate risk. While start-ups can be risky, successful investments can result in long-term wealth.
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Benefits Of Investing In Start-Ups
Start-up businesses tend to be small which means they have the potential for significant growth. By investing early, should the business succeed, the returns can be huge. Including early-stage enterprises in your investment portfolio provides diversification across your investments, which has the potential to reduce the overall portfolio investment risk.
Horizon scanning for emerging new businesses can mean savvy investors are at the front of the queue when it comes to investing in emerging markets.
How To Get Involved
Finding start-up companies to invest in can take time. Researching each business and reviewing business plans with entrepreneurs involves a lot of work for an individual investor. But there is a way to do this more efficiently: Enterprise Investment Schemes (EIS).
EIS exists to raise capital for start-up businesses from private investors, and as it’s backed by the UK government, there are tax benefits from this type of investment too.
By choosing to invest in EIS you will be investing in multiple assets. The funds raised using EIS are pooled and invested in a range of start-up businesses. This helps protect you against risks; not all the businesses you are invested in will react in the same way to market fluctuations.
Think about whether there is a sector that is of particular interest to you. If so you could consider using an investment manager, like Oxford Capital, who provide EIS investment opportunities.
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There are various potential benefits to your portfolio which can be achieved by investing in start-up businesses and EIS. By using an EIS scheme you can get involved in the early stages of a business’s growth as well as diversifying your portfolio. Conducting in-depth research, due diligence and using the knowledge of an experienced advisor can help ensure you are investing in the most sensible places.