We always dream of providing a comfortable life for our loved ones. We work hard to have a steady source of income and save for the future. However, there are times when our salaries are not enough to support the growing needs of the family due to the rising cost of commodities and services. Two choices come to mind if we want to earn additional income: start a business or invest our money in profitable initiatives like stocks or mutual funds. Since both options have risks involved, it is essential to understand which choice is better, given the situation and resources we have, before taking the initial step.
Invest or start a business?
Trying to figure out what kind of business or investment we want to pursue is important. Despite some difficulties in managing a business, many still take risks due to high-income returns when it succeeds. While investing is another good alternative, the 2021 Financial Inclusion Survey by the Bangko Sentral ng Pilipinas reveals that the most common investment type for Filipinos is contribution to pension schemes with a 96% participant share. This was followed by placement in Pag-IBIG Fund at 23% and time deposits at 2%.
Participants say that their reasons for investing were protecting themselves against emergencies (57%) and achieving their life goals (53%). Four (4) in ten (10) subjects actively invest to prepare for retirement, while three (3) in ten (10) intend to grow their wealth and accumulate assets.
Investing also comes with risks but if you can find a trusted financial advisor to guide you, this can yield high returns.
How much is your start-up capital?
You may be thinking about whether to start a business or invest your hard-earned money. While it may take time to get a return on investment (ROI) if you invest, a first-time entrepreneur has to build a business from scratch. Coming up with sufficient start-up capital is necessary to fund and cover all expenses like renting office spaces, paying bills for utilities, and buying equipment, furniture, and other supplies.
However, you should consider personal goals – be specific and realistic – when deciding how much start-up capital you will be using. Setting personal goals can motivate and give direction to keep you focused.
If you want to put up and launch a large business, you need sizeable capital for all the necessary expenditures. If you have insufficient funds, you can take a loan to augment your available financial resources. Those who gamble starting their business with insufficient capital may suffer a huge loss if the business fails. People who want to avoid borrowing money can choose to start a smaller business.
3 Comparisons You Need to Know
Point 1: Your ROI time horizon in the stock market versuss. your prospective industry
Time horizon refers to the period one can hold onto an investment before needing to access the money. It impacts ROI and is vital when it comes to investing money and starting a business in a particular industry. The time horizon must align with the investment objectives. Whether through a business or in the stock market, when do you expect a return? The payout period indicates the specific period when you can expect your invested money to be returned.
Depending on the investment goal, the time horizon can be either short-term or long-term. Short-term investments have a time horizon of one year or less while it may take several years or decades for long-term investments. Meanwhile, it can take months or years to get a return if you start a small business.
Point 2: The effort required in starting a new business requires versus managing a portfolio.
Starting a new business requires a lot of effort and hard work if we want it to last and be successful. It involves careful planning, research, making financial decisions, and marketing, among others. Launching a business and keeping it flourishing requires passion and smarts.
Meanwhile, managing a portfolio involves overseeing a selection of investments such as stocks and bonds that meet the risk tolerance and long-term financial goals of an investor. There are professional licensed portfolio managers who work for their clients but some individuals choose to manage their portfolios.
Point 3: Profitability
Every business aims for profitability which is the level toby which a company earns its profit. This means that its total income surpasses total expenses for any given period. The main objective if you start a business is to make money. It is the key indicator that tells how well a business is performing.
On the other handLikewise, investments yield profit too. You can earn money from it through returns usually earned from stock dividends and interests.
Tips for a sustainable business or investment
Whether starting a business or having an investment, your money must grow, earn profits, and remain sustainable for a long time. Building your wealth does not happen overnight. It takes a lot of skills, smarts, and passion to achieve this life goal and secure a bright future. Here are 4 tips that can guide you in sustaining your business or investments.
Tip #1: Analyze your competition
Competitions are stiff in the business. Study and learn from your competitors so you would know what to improve on your products and services before launching them. It can also give you an idea of how to make them distinct from others in the industry.
Tip #2: Be creative
As a first-time entrepreneur, always look for ways to improve your new business and make it stand out from the rest. Be open to new and creative ideas that will allow you to develop your products and services as well as expand your business in the future. You may need to diversify your products and services in the years to come when your business has gained the right footing and earns higher.
Tip #3: Offer great customer service
Your customers can make or break your business. Statistics show that 65% of customers said they have switched to another brand due to poor experience. If you deliver excellent service, your customers will remember it and choose you over the others. High-quality service is essential to gain a competitive advantage in your prospective industry.
Tip #4: Invest your money in funds with low to moderate risk tolerance.
If you are new to investments, invest in funds that have low-risk tolerance but with potentially higher returns. These include:
- Sun Life Prosperity Peso Starter Fund is a mutual fund that provides potentially higher annual returns than your standard savings account.
- Sun Life of Canada Prosperity Balanced Fund is a mix of fixed-income (debt/bond) securities that provide a prospective steady income from fixed-income securities, and equity securities (stocks) which give potentially high growth to your capital.
- Sun Life of Canada Prosperity Bond Fund enables you to potentially earn modest returns from your investments. The Fund invests its cash in high-quality government and corporate debt issued by the Philippine government and prime Philippine companies.
Check out Sun Life’s Investment Calculator and see how your money can grow over time using different financial instruments.
Whether investing or starting a business, finding a partner you can trust is critical to success. It is sometimes tough to make financial decisions. One wrong move can cost us our entire life savings. A reliable financial professional can guide us every step of the way on how to save and invest our money properly. Sun Life has a pool of highly qualified advisors who can give sound advice and create a financial plan to help us secure a bright and worry-free future for our loved ones. Connect with a financial advisor today.