How to invest in businesses

Most of us know that we do not have the qualities of an entrepreneur.

We know that we do not have the desire nor the diligence to work 14 hours a day for the sake of keeping the business on track.

We do not want to spend half the night worrying about getting money to keep the business going.

Yet we know that investing in businesses is the way to get rich.

How to invest in businesses without starting or buying a business?

The best way is to invest in the stock market.

There are many listed companies in the stock market.  Even when we do not have a lot of money for investment, we can buy the stock of two or more companies.

The problem is in choosing a business that we know very well.

For example, you always buy the same brand of shampoo, and shower cream.  You have trust in the brand, and you know that this brand sells very well.

In this case, you can buy a few shares of the company.

Before you buy, you can check the share price for the past year, past five years, and last thirty days.  This will give you an indication of the volatility of the share price.

You can check the annual reports for the past few years.

You can see how well the company weathered the financial crisis.

Many strong companies are still making money despite the financial crisis.  They may not make as much as before, but they are not making a loss either.

You can decide on a buying price, and set the price through online stock trading account.  Alternatively, you can leave word with the stockbroker to buy at certain price.

The only rule in investment is to invest in companies that you know.  You must have trust in the products, and the profitability of the company.

Another way to invest in businesses is to provide capital to your friend or relative who is going to start a business.

Instead of providing a loan, you can request for a share in the equity of the business.

That means you are co-owner of the business.

If you are not involved in the daily operation of the business, you have to get a lower share of it.  You can have 30% equity, while the owner has 70% equity in addition to his salary.

That is provided you have trust in the business acumen, and character traits of the entrepreneur.

This is a very risky investment, even when this person is your blood relative.

Everyone knows that the failure rate of a business is very high.

Once you sink in money, you are prepared to lose it completely.

However, when the business flourish, you can look forward to getting 100 times or even 1000 times your capital.

In this case, you must understand the business model, plus have complete trust in the management ability of the entrepreneur.