An Investment Strategy for Your Small Business

Business Tip: Spread Your Investment

Spread Your Investment, Don't Risk on One

Don't place your eggs all in one basket

This is a wisdom we have known that has been handed down from
generation to generation. And it is also applied in business.
If investors were to place all their assets on one particular
investment, that would involve a high risk because when the
investment fails, everything is lost. However, when you spread
your investment over two or three instruments, then if one fails,
the rest are saved and can earn for you. Those who favor the
high-risk type of investing, usually reap in a lot of profits
when the investment succeeds because of the high interest that
is attached to the investment. Those who take the more
conservative style towards investing, are more secure in their
investment, although the profit they receive is not as high.
The latter is certain to bring your business to endure in the
long term while the former style of investing - the high-risk
type, will likely make your business short-lived. What is
important in any business venture is to always decide what is
best not only for the short-term, but most of all what its effect
would be in the long-term. It is the long-term effect that we
must put our eyes on if we want our business to be solid and
stable.

The benefit of insurance

Insurance instructors always tell the story of a wise old
merchant who had the strategy of delivering his goods to a
far-away country in three big ships. He knew that if he put
all of his goods in one really big ship, when a storm comes and
sinks the ship, everything of his goods and merchandise go down
with the ship. And so, he always sends his merchandise in
three ships. And true indeed, when one of his ships went down
when a violent storm blew in the ocean, he still had two ships
which were able to deliver the rest of his goods to its
destination.

Insurance can even make this situation more secure and stable.
If for instance, that old merchant were to insure all three
ships, then when even one ship of his goes down, he shall not
lose everything but rather can get an amount to compensate for
the loss of everything in that ship. Insurance helps the
business owner and secures him against big and devastating
losses.

Tip for those extending credit to customers

In the same direction as the principle we are exploring about,
it is wiser to extend smaller amounts of credit to those with
good credit-standing. It would be indeed a higher risk if you
lend big to one customer at a high interest. When that
customer or client is unable to pay, your loss is big. But for
the style of lending small, to many good customers or clients,
when one of them suffers from anything that will bring down
his or her financial standing low because of unforseen and
unfortunate circumstances, though he may once have been in good
credit standing, his nonpayment of the loan would not be such
a great loss to your business, and your business can move on
for another term.

Tip for those with savings and investments in
banks

As with the style of not putting all your investment in one
financial instrument, so it is with your savings. Deposits
are insured up to a certain amount of money. It is wise to
place your savings up to the amount of the insurance stated by
your government insurance. It need not be exactly at the same
amount but at least more or less within the range of the
amount that is covered by insurance. And what is best is to
place all of your money in banks that are conservative in
giving interest income. Usually, banks who do this are more
stable and much more established for the long-run. Banks who
give too high an offer of interest, tend to be also liberal in
their investments. Being conservative in our style of
investing, we should also find banks and other business entities
who are also conservative in their style of investing. Otherwise,
when one goes down, then everything in our business network
falls down. If we opt for more stable, lasting and conservative
business systems, structures and institutions, then we will be
more assured of a long-term investment that will continually
reap in enough income to give us a good quality of life.