By Ross Martin, Management Consultant at Hive Business
If you have spare cash you probably want to put it to work and get the maximum return. So what should you invest in? For many people this process is rather unconscious.
A typical dental practice owner, for instance, assumes the thing to do with surplus funds is to expand their business or acquire another one. It looks good, I suppose.
This could be the right option for you, but wouldn’t it be negligent to at least consider the five other investment categories before you move along the decision making tree?
Ironically this first decision — the kind of investment you make — is the biggest and most strategic one, but also the one that most people are oblivious of or, at best, tend to rush and fumble because they don’t give it enough time.
In the end, not making a conscious decision is still a decision, and if you assume that investing in a trading business is the only thing to do you simply lose out on unexplored opportunities.
What are the other five categories you could be investing in? Equities, bonds, property, cash and commodities like gold (some commentators might also suggest there is an additional one now, in cryptocurrencies). So, assuming you have paid off all your non-mortgage debt, how do you decide? It depends on your life stage, preferences and what you already have in place.
Even the “lazy” decision of a pension contribution doesn’t in fact constitute a decision because it is a simply a wrapper — you should still decide how the funds are subsequently invested. Sadly, this consideration is often delegated or, rather, abdicated, to the financial adviser.
When you are choosing investments there are myriad decisions to make, but I believe the first one should be which area retains your interest and attention. This is the best way to ensure your decision on asset class gets due care and attention. It will therefore give you the best chances of the best return.
Then there is cost. For instance, there are large and ongoing costs for investing in a trading business. There are different costs associated with equities, bonds, property, cash and commodities, depending on how you trade. They all have risks too, which you can try and gauge, but not control. You can only control what you pay for an investment, both in money and time.
We have IFAs you can talk to if you’d like to know more about stocks and shares or bonds, but my feeling is there’s a conversation to be had before that stage. One where I ask you: what do you actually want to invest in? If you like running a business maybe it’s going to be a dental practice, and we can help with that. If not, maybe it’s one of the other five, but which one?
Asking the right questions at the right time can transform your life by making it possible, from the start of your investment, for your business affairs to be in effortless alignment with your personal disposition and preferences (work vs leisure/ risk vs security) and your stage in life (proximity to retirement/ dependents).
Want to reduce stress and free yourself up for a life well lived? This is how you do it. Let’s start with the right questions so you don’t need to come back around. It’s the same with tax planning, people jump straight to “can I pay for my car through my company?” but there’s a larger question before that: what do you want the most and where are you willing to compromise?
People tend to rush these things but there’s no need. Our philosophy at Hive is about going through the right decision-making process — and having the experience to be able to ask the right questions at the right time — so you get to enjoy the maximum possible returns in the short time you have on this planet. Sound good? Get in touch for an exploratory conversation. Call 01872 300232 or email hello@hivebusiness.co.uk.
