Ways Investing In Stock Is Better Than Starting A Business

If a young lady of about 25 years old asked you whether she should start a small side business while working in her regular 9-5 job or invest her extra income in stocks, what will your advice be?

If a young lady of about 25 years old (let’s call her Tolu) asked you whether she should start a small side business while working in her regular 9-5 job or invest her extra income in stocks, what will your advice be? If you’d ordinarily choose that she starts a small business by the side, here are different ways you will be wrong.

The Effort And Expertise Required

Both investing in stocks and starting a business possess the element of risk. However, there are fundamental elements that set them apart. If Tolu chooses to start a business, she will be restricted to her own skills, expertise and ability to make the right decisions – at least more than she makes the bad ones.

By investing in stocks, however, owning a share of the stock requires no work on her part in terms of running the business. As opposed to being limited to her experience and expertise, there are professional managers making moves every single day to ensure that she earns dividends and increase the value for her investments. Talk about working without having to do the work!

Dividend Stocks Earn You Money Periodically

So let’s say she doesn’t even mind putting in all that effort. There’s also the part where she gets broke. One of the greatest lessons of entrepreneurship is that effort does not always yield the desired results; as such, she just might not make money as she had imagined.

With high-quality dividend stocks, on the other hand, she gets to earn money periodically without doing anything. These companies have attained maturity/stability and have been able to consistently earn profits for an extended period of time.

As they increase their profitability annually, their dividends also increase. So she gets bigger cheques as the company grows. All that happens also with zero effort in running the business. Not convinced yet? There’s more.

Diversification Will Save You

Unless our lady has the full financial support of one or two billionaires, she will most likely start one kind of business in just one industry. The challenge with this is that whenever the industry takes a dip, her entire business takes a dip with it – and this isn’t just about the industry as her business could suffer sudden losses as well.

For example, if she runs a shoe business stored in a warehouse and there’s a fire outbreak, she could lose all she has overnight. By investing in stocks, she can spread her investments and build her investment portfolio to cover a wide range of industries, business classes, risk levels and more.

Even better is the fact that she can invest in inversely correlated businesses so when one crashes, she makes her money from another!

Borrowing Money Is Easier

Where she needs money to make a huge purchase and needs to take a loan, borrowing against a small-scale business will prove to be tougher than borrowing against the shares of an established business. It doesn’t matter if she invests the same amount of money in both; the value will always be different.

Opting Out Is Easier

Quitters never win, but there are undeniably times when you just need to take a break. With a business, selling off everything will prove to be harder than you can imagine.

In fact, if the business is a service-based one, good luck trying to find a buyer for the brand speedily. Not only will it prove difficult, it will definitely not be as liquid as selling off your shares. During regular market hours, you can sell off your shares in just a matter of seconds.

While there are undoubtedly non-financial advantages of running a business, these points prove that it’s not always the best approach to earning more money. But that’s totally your call.

Written by Lawretta Egba.