Reasons Why Businesses Should Invest In Securities

As a business owner or manager, your company’s financial assets should not be tied to its core performance alone

While we might have associated investing in whatever form to individuals, mutual funds, and investment groups, the underlying point is that investment is to investors. Sometimes, these investors are corporations as opposed to individuals.

As a small business owner or the finance manager of a bigger corporation, the need to open multiple sources of income for the company is something that would arise at some point or the other. And while it might mean product expansion or venturing into newer markets, it might also mean investing in securities as a company.

The investable securities range from those in the stock market, to bonds and are open to both large corporations and small business owners and its benefits can sometimes set a growing business apart from a failing one. The reasons for this are many.

The first reason is simply to create an additional means of income. Whether the business decides to take a more conservative stance by investing in the money market, a more risk-prone one by investing in the stock market, or a very risky one by investing in speculative securities, it is essentially increasing its net worth.

Another reason is that it serves as a buffer. Just the same way insurance companies and banks are known to invest funds as a way to protect the company or ensure that it always has money to meet a diverse range of needs, your small business can mitigate its financial position by having a more steady form of income growth.

For businesses that are seasonal in nature, investing in a diverse portfolio would help ensure that income comes from a source or the other.

Investing as a company would also come in handy during economic downturns. This can be a form of hedging mechanism where the firm balances its ordinary activities with investments in securities that perform differently from it.

A company can protect itself from economic downturns, foreign exchange crisis, and economic recessions, by investing in assets of other industries or those in other markets.

As such, when the company’s customers or clients spending reduces, a steady income stream is available.

Investing in the money market can also provide funds that the company can use to cover its short term operations. It pays the company more to invest in low-risk securities as these would always be better than simply holding the company’s funds in low-interest savings accounts that cannot match the rising inflation rate.

Business owners and corporations can also invest in speculative investments as a form of R&D into innovative spaces the company might diversify into. For example, a company can start investing in agricultural businesses that are quoted on the Nigerian stock exchange and understanding its growth patterns before deciding to create a new business function that caters specifically to the Agricultural industry.

As a business owner or manager, your company’s financial assets should not be tied to its core performance alone. Investing in securities can be the push that the company has been searching for.

Written by Lawretta Egba.