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First of all,
are you planning to invest in someone else's small business or start
your own? Small business investing doesn't have to entail all the
blood, sweat and tears associated with running a company. Of course,
when you're the engine behind the operation, you get to take home
a much bigger slice of the pie.
Compared to real estate, business investing comes with higher risk
and the potential for higher reward. If you provide funding for
another entrepreneur as a loan or in exchange for equity, you can
reduce the risk by limiting your exposure. Still, the return all
depends on the business and the circumstances.
Real estate certainly comes with risk, but dropping property prices
don't cause land to disappear the way a struggling economy can swallow
up small businesses. Even if prices fall significantly, they're
pretty much destined to rise again at some point.
Another important question to ask yourself: is this investment more
about diversifying assets or increasing income? Most new companies
take a little longer than expected for earnings to pick up, so you
shouldn't expect a quick turnaround on that investment. Meanwhile,
if you buy a rental property and pay in cash, you turn that capital
into equity and start seeing monthly revenue in a comparatively
short amount of time.
You also need to consider how much effort you want to put into investing.
If you have the time and interest, you might really enjoy teaming
up with a small business owner and calling some of the shots. You
could similarly have fun becoming a property owner and renting the
place out. If you want to let your money do the work, investing
in an expanding company with a solid foundation might be more your
speed.
Both of these options are included in my financial bucket list,
which you can read about on GoFarWithKovar.com.
Active investing is great for your money and your mind, and I think
real estate and small businesses make great additions to your financial
portfolio. I would spend a little time thinking about what interests
you more, then make sure you let sound reasoning and logic drive
your decision. Make informed choices and you should be able to move
forward without regrets. Good luck, Justin!
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