Navigating Investment Risks for Small Businesses

Talking about risks for small businesses, one of the areas is around investments. Now I want to talk about a few different investment opportunities and why there's a risk factor associated with them. So a lot of people like to jump into real estate as an investment, which I think is a fantastic investment. I have some real estate investments myself, but it's not the be all and end all of building money or building investments. In fact, it's a heavy risk associated with real estate. And here's why. In order to get access to real estate, we have to use a good chunk of cash as a down payment to get into that real estate investment. By giving up that cash, we're giving up control of that as an asset we have in our business. And we're also. When we have a real estate transaction or a real estate investments, there's a chance that it takes our focus off of our primary business. Right? It's very attention seeking. We've all heard of tenants who are terrible or people who are leaving and vacating and leaving garbage and cleaning and painting and repairs and all of that good stuff. So there's a chance there that it's taking our focus off and we've got issues we've got to deal with. The other part with real estate, and a lot of people don't understand it is yes, we might be making profit off of our real estate, but when we have mortgage payments that we have to make on our real estate investments, it could actually lead to negative cash flow. And a lot of times right now with higher interest rates and the way that that's looking, higher cost of entry for buying real estate investments. Real estate investments are not coming in at a positive cash flow. And especially if you are new to real estate and you're buying a single family dwelling or a three plex or a six plex, a lot of times those investments are not returning a positive cash flow. So not only do you have to give a bunch of cash upfront, but you also have to continuously fund it on a month to month basis. And now it's creating stress in your life because you're having to put cash from your business back into your real estate just to keep it going. So real estate, although I think it can be a wonderful investment, can also be very, very challenging. A couple of areas that I like to see investments, or maybe I'll just specifically focus on, one is putting money into some sort of non or low fee investment inside the market, let's say an index fund, for example. We put money into an index fund, it follows the markets, it goes up and down. It doesn't fluctuate at an extreme level. But when we've looked at the history of the markets, they've always gone up from a historical point to an ending point. You might have dips in time that aren't great. But what this does, if we put that money inside our business, inside an investment account, we can actually have advisors who don't even charge to give us advice on where the markets are going. If the markets aren't going in a great spot, we could likely pull it out, or we could put more in when we see things that are are at a benefit. The reason I like this type of investment isn't so much for the return on the investment, although it can be good. The reason I like it is because it's accessible to cash. If I put something in an index fund and all of a sudden something happens in my business or I get a new opportunity, which my business is going to give me, you know, the best returns I'm ever going to get, I can pull that cash back out back into my business and reinvest so I don't miss out on a great opportunity. It's tied up in real estate or something else that's long term. I can't get access to that cash for a long period of time and it's handcuffing me in the opportunities I have in my business. So when you're looking at your investments, make sure that they continue to focus on a flexible option for you so that you can pull those investments back and get it back invested in your highest return, which is likely going to be your business.