Investing Strategically
No matter what investments you choose for your business, you can get more out of your portfolio by following a few basic strategies. Here are two suggestions that can help you get the most from your business investing strategy.
Diversify
Diversification through a balanced mix of assets can increase your opportunities for investment success and help manage risk.
Diversification provides exposure to a wider range of investment returns, at the same time reducing the hazards of focusing too much on a single type or category of investment.
Broadly speaking, there are three major asset classes. A balanced business investment portfolio should contain a mix of all these asset types.
Cash and Cash Equivalent
These include investments such as cashable GICs, treasury bills and Security Mutual Funds such as money market and T-bill mutual funds. These investments are regarded as highly secure and generally earn modest returns. They’re ideal for short-term business needs.
Fixed Income
This asset class includes bonds, conventional GICs, Income Funds and other investments that provide income through interest, dividends or other means. These tend to offer higher potential returns than cash or cash equivalent investments, with a slightly higher level of risk. These can meet many business investment needs and time horizons, with the advantage of relative security of capital and steady income.
Equities
These fall into the category of growth investments. Equities can be purchased directly or you can invest in stocks through mutual funds. Equities offer excellent potential for significant investment appreciation. However, risk is greater and share prices are often volatile. Because of volatility, these are better suited to your business’s longer-term investment needs.
It’s a good idea to diversify within each asset class. This creates even more balance in a portfolio. For example, equity investments or equity mutual fund investments can be further diversified by investing in a number of geographic areas or economic sectors. Fixed income investments can be diversified by term and asset type.
Invest in U.S. Dollars
Businesses that frequently make transactions in U.S. dollars should consider U.S. dollar investments.
By investing in U.S. dollars you can realizing savings by not constantly converting to and from Canadian currency, protect your business from currency fluctuations, simplify planning for the U.S. portion of your operations and give yourself the potential to enhance investment profits when the U.S. dollar rises against the Canadian dollar. Plus, you’ll earn competitive investment returns. Get more information on U.S. dollar term investments and U.S. dollar mutual funds.
