3 tips on balancing funds to run a business and invest at the same time
These days, an uncertain global growth outlook, lingering trade tensions, and highly volatile stock markets are key concerns that corporate investors grapple with as they allocate funds for business and investments.
Even with cash to spare, it may seem more worthwhile putting money back into growing your business than spending time investing in equities or bonds.
Still, tough as it is, balancing funds for your business and for an investment portfolio is essential – if you want to secure a healthy financial future for your firm.
Here are three tips to help you become a savvy corporate investor:
For many business owners, their net worth – not to mention all their resources, expertise, and time – is tied up in their business. That means that there’s a concentrated risk exposure in one single company.
The problem is if their firm were to run into financial difficulties, they would not have any assets unrelated to the business to fall back on.
Smart business owners recognise that while it is indeed important to reinvest in your company to keep it growing and stave off the risk of insolvency, that is far from enough.
You also need to invest wisely in other companies through the stock market, as well as other assets such as bonds and real estate investment trusts. These can provide your business with a risk-adjusted return, as well as a buffer for your personal finances.
Rather than doubling down on your own business, investing in a diversified portfolio exposed to other unrelated industries can help you weather downturns in your own sector.
UOBAM Invest, launched by UOB Asset Management (UOBAM) is a smart tool that can help you balance your business and corporate investment objectives. Through a risk assessment and with your input on your investment goals and investment horizon, UOBAM Invest customises a portfolio of UOBAM unit trusts and global exchange traded funds, best suited to your risk appetite.
Research has shown that how efficiently a company manages its working capital will impact its overall profitability.
This requires entrepreneurs to plan well ahead to cover short-term working capital needs like wages, raw materials, and overhead costs, while allocating funds for longer-term projects such as building a new factory.
For instance, you may require a large chunk of money for a major project in three years’ time but leaving that cash in a bank account earning minimal interest would be imprudent.
Yet figuring out just how much money to invest in what kind of financial instruments to cover both your short-term and long-term goals is not an easy call, especially with the current volatile market conditions.
Why not tap on the power of digital technology to help you plan in the most optimal and convenient way?
In UOBAM Invest, the Portfolio Planner is a key feature that enables corporate investors to aggregate all their investment goals. Input your inflows, such as current and future contributions, outflows such as future spending and set priority levels for each goal. UOBAM Invest will then calculate the success probability1 of your plan. This way, you can monitor your investment goals and also review the viability of your plan.
Every business will no doubt encounter unexpected changes, from a sudden big order from a customer that stretches your resources to an abrupt cancellation of a shipment.
These surprises will affect your short-term cash flow needs or your long-term capital outlays, and in turn impact your investment portfolio.
That’s why only liquid assets are included in UOBAM Invest so that corporate investors can have the flexibility to invest based on their investment needs, goals and horizon. You can also adjust the level of your exposure for the different asset classes (e.g. cash, bonds and equities)2. For instance, you can choose to have more exposure to equities for a more aggressive portfolio, and meet your investment targets earlier.
Rest assured that UOBAM Invest will also alert you when you adjust your risk appetite beyond your risk category. After all, we designed UOBAM Invest with the best interests for your corporate’s investment needs in mind, and that will not change no matter how much business conditions do.
Find out more about UOBAM Invest, Singapore’s first robo-advisory service for businesses to manage their investments digitally.
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