Running an investment business is very different from running a traditional brick-and-mortar or even an eCommerce store. While it shares similarities, including the need for adequate capital and a thoroughly-devised plan, how you build an investment firm can be a vastly different path.
There are multiple risk factors and ever-changing variables that an investor must be prepared for. To help you build a solid foundation for your investing business, here are five ways to get started:
Today's investors are fortunate enough to be able to place buy and sell orders in real-time. Gone are the days when you'd have to call a broker on the trading floor to open a position. At the same time, you can complete said order within the day.
It's not the most exciting part of owning and operating a business. Still, it is one of the essential facets of any commercial enterprise: a retail store or an investment portfolio. For instance, make sure you are aware of and comply with blue sky filings.
How well your investment portfolio performs hinges on your investment-selection approach. You must have sound reasoning beyond gut instinct when you invest in an asset, whether it's treasury bonds of a foreign country or a promising new tech company.
Not only will it help ease the process of filing taxes every year, but having a comprehensive record of your investments can give you a clearer picture of what you're doing right and what needs improving.
Although robo advisors are involved in many financial planning utilities, one of its main applications is automated investing through algorithms that look for specific parameters to determine when to buy or sell an asset. Most robo advisors use mutual funds or ETFs instead of individual stocks to build your portfolio.
Open a Brokerage Account
Today's investors are fortunate enough to be able to place buy and sell orders in real-time. Gone are the days when you'd have to call a broker on the trading floor to open a position. At the same time, you can complete said order within the day.
This archaic form of investing left investors at risk of getting in on trade at less favorable prices. It only takes a few clicks of the mouse button with an online brokerage account to own a stock or commodity.
When comparison shopping for broker accounts, field your candidates for commissions and other related fees, available asset classes you can buy and sell, and dashboard features, i.e., analytical tools, technical indicators, beginner courses, etcetera.
Protect Yourself Legally
It's not the most exciting part of owning and operating a business. Still, it is one of the essential facets of any commercial enterprise: a retail store or an investment portfolio. For instance, make sure you are aware of and comply with blue sky filings.
This state-level, anti-fraud law requires security issuers to disclose the terms of their offering and any material information that could impact the underlying security value. Blue sky laws can vary by state, but these regulations are set to protect people from fraudulent investments.
You should also understand how to file your taxes as any income sourced from securities is taxed at a different rate than your ordinary income.
Decide on Your Investment Approach
How well your investment portfolio performs hinges on your investment-selection approach. You must have sound reasoning beyond gut instinct when you invest in an asset, whether it's treasury bonds of a foreign country or a promising new tech company.
Having a technical strategy helps weed out high-risk, low-reward assets while also allowing you to achieve more consistent and predictable results. Some investment strategies to study for beginners include value investing, growth investing, and small-cap investing.
Record Everything
Not only will it help ease the process of filing taxes every year, but having a comprehensive record of your investments can give you a clearer picture of what you're doing right and what needs improving.
For instance, you can analyze the timestamps of each investment bought or sold in the last quarter to gauge whether or not short-term positions churned a profit or loss. You can manually record your positions in a notebook or request an account statement from your broker, which is offered at no cost.
You can also use an online trading journal to record your positions in a blog post format. Like Babypips, websites allow you to post your trades to the public and read other investor's blog posts as well.
Consider Robo Advisors
Although robo advisors are involved in many financial planning utilities, one of its main applications is automated investing through algorithms that look for specific parameters to determine when to buy or sell an asset. Most robo advisors use mutual funds or ETFs instead of individual stocks to build your portfolio.
In addition to robo advisors, you can also use a copy trading platform to follow and copy other more experienced investors’ trades. Any time they place a trade, your account makes the same one.
Investing as a business affords many pleasures, including minimal startup costs, flexibility in work hours, and multiple avenues to secure a profit. That said, it's also a performance-based business where growth and profitability are directly tied to how well you can analyze financial markets and how consistent you are in following your risk management measures.
Investing as a business affords many pleasures, including minimal startup costs, flexibility in work hours, and multiple avenues to secure a profit. That said, it's also a performance-based business where growth and profitability are directly tied to how well you can analyze financial markets and how consistent you are in following your risk management measures.
As a final piece of advice, know when to take a profit. As your portfolio grows, you'll want to lower your positions’ overall risk by systematically withdrawing money out of your account.
