People usually raise capital through fairly traditional means. By that, of course, I mean that they usually just go to their bank to get a loan! But someone’s credit isn’t always good enough to get the loan they need. There are other options, of course. If it’s the right sort of business, someone could look into getting a grant from the government.
These days, it seems that people are more willing than ever to look into more independent investment. They’ll head over to a crowdfunding platform like Kickstarter to try to get people interested in their business idea. But crowdfunding isn’t as easy as a lot of people make it out to be. Sometimes, certain business ideas are hard to crowdfund, even if they are really good ideas.
This leaves people without many options for capital except for going as independent as possible. And if someone wants to raise money in such a way, they may be tempted to look into selling their assets. But again, it’s not like everyone has valuable assets they can sell! So have we pretty much exhausted all the ways in which someone can raise capital for a business? Besides, you know, striking it rich with a lottery ticket?
Well, a surprising number of people have actually raised capital for their business idea using stocks. You may think that that’s unrealistic. And it’s true that stocks aren’t a get-rich-quick scheme, at least not in the way that some make it out to be. But it’s certainly not impossible. If you have some money that you need to increase by a strong amount, why not give it a try?
We’re going to take a quick look at stock investments and raising money using them. What we’ll end up with is a guide that could be useful for people looking to invest in stocks for any reason.
Getting rid of the media lens
A lot of people have misconceptions about stocks. It’s a business that’s depicted so often in the media that people often get their image of the business a bit skewed. This is certainly the case for many people who saw films like The Wolf of Wall Street! That film depicted the stock business as dangerous in a few ways. It made the business of brokership look incredibly corrupt. But it also made the business of actually investing look incredibly dangerous. Like something that could easily get you scammed. (Not that it doesn’t also have some positive messages for those looking to make money, too! Read more about that at http://www.businessinsider.com/wolf-of-wall-street.)
But you need to remove those images from your mind. Investing is, to tell you the truth, fairly normal. Sure, it can be exciting. But don’t expect there to be a lot of filth or criminality that you have to work hard to avoid. The stock business really is mostly dealing with numbers, economics, and business news!
Starting with a single stock – and some practice
If you’ve not invested in stocks before, then you need to take things slow. I know you’re looking for a good amount of capital. But that doesn’t mean you should just blow a load of money of several stocks at once and see what happens. You need to take your time. You need to learn the ropes!
One of the best ways to do this is begin with some practice trading. There are a bunch of resources out there for virtual trading that allow you to get an idea of how things works. You can see an incredibly basic but free and useful one at http://virtualtrading.com/. But there are a bunch of options out there that you can pay for that get a bit more advanced. Opening a virtual account with an investment broker is definitely something you should look into.
Once you’ve got some practice in, you should start by buying a single stock. You have to remember that you first purchase is going to be more of a learning experience than a really lucrative opportunity. If you buy a single stock, then you can follow the journey of that single stock to get a better idea of how everything affects it. When you get several, this learning process can become a bit cluttered and confusing. You can read more about trading workshops as a learning experience at http://www.tradingacademy.com/.
Doing some heavy research
So it should be clear by now that going into this without a plan is a bad idea. Going in slow is the best way to go. Hence the suggestion that you start with a single stock! This should highlight the importance of taking your time and planning thoroughly. And a key element to this process is research.
Before investing in the stock of any company, you need to find out as much as you can about that company. Otherwise, you’re basically just going in completely blind. What can you tell someone about the financial history of a particular company you’re interested in? When you know their recent financial history, you may be able to get a projection of their financial future. And if you’re investing in them, then their financial future is your financial future! Read more about picking the right company over at http://www.wisebread.com/4-quick-ways-to-decide-if-a-company-is-worth-your-investment.
You may have heard that where good money can really be made is in volatile markets. Of course, people often get uncomfortable when they hear the word ‘volatile’. They think that the word is synonymous with dangerous. But this isn’t what is meant at all.
A volatile stock is a stock that can change in value very suddenly. There’s something you may have noticed about that statement. Don’t what apply to all stocks? In fact, it does. All stocks are volatile to some extent. All investments in stock are risks and gambles. Volatile stocks, in particular, simply rise and fall at a faster rate than other stocks.
This doesn’t mean you should avoid them. In fact, stocks that are more volatile have often proven to be very lucrative. They’re better for people who are looking for long-term investments. Take a look at something like penny stocks, for example. Many investors have found great success by investing in these sorts of stocks. It’s simply a case of investing and ‘holding on’. Yes, things will fluctuate. But “weathering the storm”, so to speak, can see you make big returns at the end. Check out some relevant opportunities over at http://moneymorning.com/tag/penny-stocks-today/.
The popular image of penny stocks
But wait, aren’t penny stocks the precise kind of stocks that were featured in The Wolf of Wall Street? Aren’t they actually really dangerous and unlikely to make you any return? Well, I’ve already told you to ignore media depictions! If you’re still unsure, we can look at a few examples of successful penny stock companies.
Back in 2003, there was a company called Hansen’s Natural. They were a penny stock company; you could buy stock from them for as low as a quarter of a cent. They were a pretty popular company, and had seen the usual fluctuations in stock. Things were especially interesting that year, because they had just launched a new drink product the previous year. That product was called Monster. Yes, that Monster. Those who invested in those stocks and weathered the storm really had a lot to show some time later. After all, the company now make over a billion dollars every year. In fact, Hansen’s Natural is now their old company name – they decided to just call themselves the Monster Corporation! You can read more about this success at http://fortune.com/2012/11/05/how-hansens-natural-created-a-monster/.
Is the interest rate really that dangerous?
One thing that worries people is the effect that interest rates can have on stocks. It’s a frequent worry on the news, for sure. After all, the interest rate is basically raised by the government without any warning to investors. How exactly can these interest rates affect your investment? Can someone really be safe investing in stocks when such a wild card is in play?
Well, the effect that interest rate has on stock is actually exaggerated. Data ranging all the way back to the 1970s suggests that stocks actually retain their value quite well during interest rate fluctuations. It is important to realize that the value can decrease when interest rates rise, and that it will make them harder to sell. But this is usually short-term as opposed to long-term, as many believe. If you look at it from a long-term perspective, however, it’s clear that interest rates don’t damage stock investments as much as people thing. You can read more about it over at http://fortune.com/2015/05/26/investing-rising-interest-rates/.
Playing it safe
Investing in stock can definitely help you out when it comes to raising capital. But, again, you shouldn’t be going in blind. You need to take your time and really work out if it’s the best option for you. Investing in stock isn’t necessarily a “last resort” and shouldn’t be painted as one. But the other methods of capital acquirement can certainly be more consistent. Good luck!