In investments, the idea of not putting all “eggs” in the same “basket” rings true for every smart investor looking to maximize their profit. It’s never a good idea to put all your money in one type of investment because there’s a risk that that venture could fail and you lose everything. Some people’s rags-to-riches stories claim to have gotten their wealth by doing this, but it’s a huge risk to take that you’re better off diversifying your portfolio.
There are plenty of areas where you can invest: stocks, rental properties, mutual funds, bonds, and business investments. These assets react differently during economic changes, so by diversifying your portfolio, even if one area fails, you have another area to make up for that loss.
However, one area of investment not a lot of people seem to ignore is the start-up industry. Whether you choose to invest in fintech companies, manufacturing companies, or any other type of start-up, there’s always going to be a risk of failure. But if it becomes successful, the profits can be much higher than you imagine, and here’s why.
The Success of a Start-Up
Some of the struggling start-ups today can be the household brands of tomorrow. The photo-sharing app Instagram was a start-up; today, it’s worth over $100 billion. Before Uber, people relied on public transportation, buying their own cars, or unreliable taxi services. Today, Uber has become a necessity for those looking to get around conveniently. And if you’ve seen Shark Tank, the Scrub Daddy sponge that began with less than $200,000 got the right investment from investor Lori Greiner and is now worth $170 million today.
Although start-ups may be small and only have one or a handful of people working on it, it could be worth much more than its big competitors today. It’s a huge what-if, but if your instincts are right and you choose a suitable start-up, you’ll be there when the company expands, reaping the profits as an investor.
Help a Start-Up in Your Field of Choice to Succeed
Socially conscious investors can choose which start-up to succeed, especially those whose mission or vision the investor agrees with. For example, consumer trends are changing as millennials prefer to support eco-friendly and sustainable businesses. If you want to increase the number of eco-friendly companies in the market, you can help a green business to start their operations and have a significant impact on the market.
Potential for High Return
Two things can happen to a successful start-up: either the business can become successful enough to become a large company on its own, or a more giant corporation acquires it. If either happens, you can expect a substantial return on investment, especially if you’ve been with the start-up for a long time.
Should a corporation acquire it, a good exit strategy ensures you come out with your profit. Knowing how much the company will be sold for, how much money you’ve invested, and how much of the percentage of the profits you’re getting can help ensure you get a high return.
Investing in a start-up can be a smart investment for those looking for high-return additions to their portfolio. There are risks to take when investing in these companies, but if you invest smartly, you could stand a chance of a high return on investment.
