Home > Finance > Using The Stock Market To Fund A Startup

Using The Stock Market To Fund A Startup

152 Views
startup funding

Funding a startup hardly comes easy. Access to capital isn't truly accessible to most people. Some people find approvals on loans to be elusive. And honestly, a loan isn't always the best way to fund a startup. Neither is using all your savings. What happens if the business goes south?

Sometimes, more dynamic means make sense when trying to put money into a startup enterprise. While not the easiest strategy, making money in the stock market or other investment vehicles could be a way to fund – or partially fund – a startup. Let's look at some concepts about how to go about doing this.

 

The Principle At Work

People put money into investments with the intention of increasing their net worth. Investors put money into the stock market, in bonds, and other endeavors to make more money. So, the idea here is any gain made from an investment becomes "found money" that helps fund a startup. A 7% return on $10,000 means the startup gains an additional $700 in covered expenses. A 7% return on $1 million in investments could fund the entire launch of a new small business.

 

Understand the Reality of the Market

Before looking at the stock market as the perfect solution to startup funding concerns, keep something important in mind. The stock market does not represent a guaranteed income vehicle. The Dow Jones goes up and down. Hopefully, an investor sees a return on his/her decisions. The possibility does exist; however, the market could decline. In 2008, the market outright crashed and wiped away massive amounts of people's wealth.

Don't automatically assume you will get what you want out of any market investments. The potential for losses exist. So, you must be careful and deliberate with any plans to make money from the stock market. Actually, this advice applies to any investment strategy. You should make sure you fully understand what you are doing before investing. As such, you should think about reaching out to companies like Options Animal to help you learn about the market.

 

Overnight Stocking Market "Killings" Are Still Fantasy

Don't be under the assumption if you put money in the market in January that, by March, you'll be able to pay all the costs on your startup. Fantasies about overnight windfalls from the stock market put dangerous ideas into people's minds. The stock market is home to volatile, aggressive assets. Not only do these types of stocks come with a high chance for losses, the gains probably won't even remotely come close to doubling an initial investment. Look at the stock market as a source for conservative returns on an investment.

 

Returns May Only Pay a Portion of Expenses

The idea that you'll make enough money in the stock market to pay off all the costs associated with a startup might not be realistic. This notion is doubly true when you only have a limited amount of money to invest in the market. You won't likely turn a $5,000 investment into $100,000 within a short period.

Don't dismiss the benefit of a smallish return paying off some of the expenses associated with launching a startup. Any little bit of money lends an assist. If a good return from the market covers some costs, consider the result far better than seeing no returns at all.

 

Startups Require a Smart Business Plan

Even if you get all the funding you want for a startup, the endeavor won't last when the planning is poor. No matter how someone funds a lousy busy model, the funds will go to waste. Putting all your effort into strategies for funding the startup at the expense of strategizing how to run the startup may be a weak plan. Be sure to plan out the various phases of the business from inception through multiple levels of growth. Budget the venture appropriately. These steps increase the chances of getting investment money to put to other good use.

TAGS , , , , , , , , , , , ,
Do NOT follow this link or you will be banned from the site!