Every entrepreneur sets up their business to generate profit. But fewer of them anticipate that worse periods may come into the business. Everyone who has started their own business works daily to make their business prosper. However, in practice, you will quickly find that this effort is not always enough. There are risks associated with the company, and you can influence some, some partially and some not at all.
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The Risks You Can Face From Investing
Entrepreneurs often run their business in rented premises, and sometimes, the landlord terminates their lease. The entrepreneur has to deal with the search for new premises and may have to interrupt his business for some time. Or the supplier may cease to operate, begin to supply goods or services in degraded quality, or significantly increase prices. These are all unpleasant situations, but the entrepreneur can solve them to influence them.
Partially Controllable Risks
As an example of a partially controllable risk, we can consider, for example, the current situation – the COVID-19 pandemic. This period has been incredibly complicated for several entrepreneurs around the world, and sometimes it has completely “broken down” plans. Skillful entrepreneurs have found a way to solve the situation and ideally turn the situation into an advantage. Some restaurants reoriented their business to delivery, some coaches began broadcasting their workouts online, and some taxi drivers started driving food and other goods instead of people. Entrepreneurs do not know how to influence a situation with a pandemic, but in part, they know how to change their business concept.
In this category, we can include changes in laws that impact business, taxes, employment, customs, licenses, concessions, etc., but also an increase in interest rates in banks on business loans or stricter conditions for providing business loans. Another example could be changed in the market or competition with not entirely pure intentions. And these circumstances make it difficult for entrepreneurs to change or adapt to them.
So it is clear that you cannot wholly eliminate business risk, but you can reduce it. Successful business owners have long understood that they should spread the risk, so they invest some of their money. They invest in a sector other than their business. Therefore, all circumstances need to be considered when choosing it. If you do not dare, you can contact an experienced financial intermediary.
Slovak entrepreneurs often invest in local bonds and bills of exchange. “Unfortunately, such an investment is not always safe, and it is often even riskier than their business. Few of them realize that they are essentially lending funds to another entrepreneur. And so, it is essentially what the company does with the borrowed money. With bills of exchange and bonds, they often have no guarantee that they will get their money back.
Of course, if they lend money to a prosperous company that generates long-term profit, grows, and owns real estate, the funds will likely return to them even at a profit. “In practice, however, these investments often have no coverage, because the companies that issue them are newly established with a registered capital of 5,000 euros and therefore have virtually no guarantee. For larger companies that issue bonds, the risk can be well hidden from the layman, for example, in the form of subordinated debt. Therefore, it is appropriate to be careful when investing funds and be more interested in details and substance than just marketing and the promised profit percentage.
How To Invest With Lower Risk?
When investing either through the Individual Portfolio or the Active Managed Portfolio, as an investor, you ultimately have a spread of investments in several hundred shares and bonds of large companies. Therefore the risk is very widely spread. Suppose you decide to invest in this way, in addition to owning your company. In that case, you become a co-owner of major global companies such as Apple, Google, Amazon, Pfizer, Coca-Cola, Tesla, Johnson & Johnson, Invidia, Berkshire Hathaway, and the like. You also become a co-owner of government bonds, both European and US bonds.