Blog Post, Investments

6 Things Private Equity Firms Look for in Start ups

Not every company qualifies for private equity since there are certain things they look for in a company to determine if it's worth investing in. Private equity firms must research since they invest between $50 million and $1 billion in a business. If you need assistance for your small business, you can opt for a private equity investment. Make sure you tailor your business to meet the needs of private equity firms. Here are things private equity firms look for in startups.

What is a private equity firm?

A private equity (PE) firm is an investment company that uses its funds or funds from other investors to invest in startup operations. PE firms invest in companies that are not listed publicly. Private equity firms have a mission of investing in companies, creating value, and selling their shares to get the greatest gain.

As such, PE firms are always on the lookout for business with growth potential. They buy the majority position in an organization and make it successful by leveraging the resources.

What PE firms look for

1. Strong management team

One of the things that private equity firms look for is a good management team. Top-quality managers are a factor PE firms consider unless they want to change the management. Private equity firms must invest in companies with top quality management teams since they will not run the day-to-day activities of the company. Private equity firms look for a management team that can do the following:

  • Growth through sales motion including customers, new joint ventures, and alliances
  • Changing the structure of the company to cut down on costs
  • Know how to transform the business model to reflect customer needs

2. Steady cash flows

Private equity firms use leveraged buy-out on a company. They'll, therefore, need a company with steady cash flows to help them meet the interest payments. Missing the interest payments would mean losing ownership of the company. PE firms will also have a view of sales, operating costs, assets, inventory, overhead, and liabilities.

3. Favorable industry trends

PE firms also look at the disruptive technology within an industry when deciding on the company to invest in. The organization's mission and vision must align to the potential for transforming the industry.

4. Potential for growth

Growth potential is also another factor that PE firms look for when choosing an investment. Private equity firms need high rates of growth to get a bigger market share. It's, therefore, crucial for the company to be well-positioned in the market. Here are a few factors that indicate potential growth:

  • State of the market landscape for the industry
  • Past successes
  • Sufficient market size
  • Stable customer base
  • A positive state of the industry

5. Security

Private equity firms, unlike banks, don't have an idea of the return on investment. They stand to lose everything if things don't go as planned and the company goes into bankruptcy. PE firms look for things that will bring security, such as:

  • Financial visibility
  • Sound contingency plan

6. Low capital requirements

PE firms look for a business that can sustain themselves with only one investment. If a business needs multiple rounds of investment, then it will not be an ideal target for PE firms.

Private equity firms invest in businesses to create value in a few years. Therefore, they look for companies with growth potential. If your business is growing but you don't qualify for bank loans, you should consider private equity firms. Once you understand what private equity firms look for, you'll be better placed to get a good deal. If a PE firm is not an ideal option for you, you can get in touch with us to get advice on the best investment option for your business.

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Blog Post, Investments

What is the Difference Between Private Equity and Venture Capital?

Venture capital and private equity are types of investors who invest in private companies in exchange for future profits and exchange for ownership. Most people confuse private equity with venture capital, since they refer to investing in companies and exiting by selling the investment. Here is a look at the differences between private equity and venture capital.

What is private equity?

Private equity is when firms invest in a company. As a private equity investor, your focus will be on companies that are mature and not in the growth stage. The goal of the private equity investor is to get a return on their investment.

Private equity firms invest in companies that are not publicly listed. In private equity, high net worth individuals and organizations buy a share of private companies. Investors can also invest in public companies to delist them from the stock exchanges.

What is Venture Capital?

Venture capital firms invest in companies in their start-up phases with growth potential. The funding comes from investment banks, specialized venture capital, and wealthy investors. The investment is not only financial, but startups also benefit in the form of managerial expertise.

Differences between private equity and venture capital

While private equity and venture capital seem to overlap, there are still significant differences between them. Here are some differences between private equity and venture capital.

Type of Business Invested In

Private equity investors want well-established businesses. They look for a business that is struggling due to poor processes or failing to make profits. Private equity takes on less risk but has a lower return on investment. The investor comes into the business and makes significant improvements. Venture capital investors look for companies with high growth potential. A venture investor can take more risks.

Stage of Company

Private equity and venture capital investors invest in companies in different stages. Private equity firms invest in companies that are established and have five years or more in operation. Venture capital investors, on the other hand, invest in newer companies and startups. The companies are just getting off the ground.

Ownership Status

Private equity firms buy a majority share of the organization's shares and participate in the management. They have at least 51% which is needed for a controlling share. Venture capital firms are minority investors in an organization. They buy less equity and allow the company to maintain control.

Private equity companies buy 100% of the company while venture capitalists acquire less than 50% of the company.

Exit Strategy

Private equity investors invest in a business, improve it and then sell it. They are not interested in being in business for a long time. The exit opportunities for private equity are venture capitalists, hedge funds, entrepreneurships, and secondary funds. The exit opportunities for venture capital investors are the venture capital fund, buy-back shares, initial public offerings, and mergers and acquisitions.


Venture capital firms use equity to make investments and private equity firms use both debt and equity.

Types of Industries

Private equity companies invest in all types of industries, irrespective of the industry they operate in. Venture capital investors focus on companies belonging to industries like clean-tech, biotech, and technology.

Size of Investment

The investment size in private equity is 100 million dollars minimum and a maximum of 10 billion dollars. Venture capital firms, on the other hand, have much smaller investment size. The investment size of venture capital is 10 million dollars or less.

The above are some of the differences between private equity and venture capital. If you were looking for funding for your business, now you know which one to choose from.

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5 Most Common Financial Mistakes That Startups Make

As an entrepreneur, you need to work your way up to build your services or products, grow your business, and achieve your goals. At startup, every company faces challenges reaching new markets and expanding their business. Unless you are a top financial whiz, working out a proper financial plan with precise numbers will be challenging. Still, it is essential to avoid falling into the wayside.

Even the best financiers can find creating a working financial plan challenging. Proper financial plans are critical to the success of all business operations from the start. They're the best way to convince investors of the company's validity and meet customer demands.

Fortunately, some widely successful startups are minting millions yet are still very young. For example, the success rate of companies such as Facebook, WhatsApp, and Twitter shows that it is possible to become successful even at a startup with the right financial plan.

Most startups fall victim to various common mistakes. When you learn and understand these missteps, you can make the necessary adjustments to avoid them early enough and accomplish your goals. Here are the five most common mistakes financial mistakes startups make and how to avoid them.

1. Underestimating Your Cash Burn

A business burn rate refers to the amount of capital required every month to keep your business in operation. Most people ignore these rates at startups either due to miscalculation or ignorance. When you don't understand your burn rate accurately, it will hinder your ability to achieve your milestones before you run out of finances.

The first step to managing your finances effectively is to have a bottom-up projection and use real-world variables before you venture into an investment. Reforecasting is also another way to make predictions on what to expect in the current state of your business.

2. Failing To Understand the Market Conditions

It is essential to understand the market conditions at startup to develop a proper pricing plan for your products or services. Don't merely add up costs without considering the margins you want to make.

It would be best to understand your customers and research the pricing methods of your competitors. You will have more to offer and follow the trends in the market to avoid lagging.

3. Hiring and Expanding Quickly

The greatest expense for any business is its employees. Your staff and everyone involved in your company's operations gets paid in incentives, and it significantly affects your finances.

It is best to keep the costs low by saving money on staffing. Many employees are a huge drain on your finances. It is beneficial to use technology to automate most manual tasks and hire only for value addition. Also, hire slowly and improve your business process before making hiring decisions.

4. Making Bad Hires

Hiring is a daunting process that takes time and money. It would be best to only hire for potential as opposed to experience. You don't have to waste money and effort on hiring experience when you don't need the skills in the workplace. You can use alternative ways like outsourcing to help you focus more on business-critical processes.

5. Doing Your Finances Yourself with No Prior Training

When your business is earning good revenue, you need to look for financial services from a reputable CFO to manage them. They will offer financial support and help with business accounting and bookkeeping. These professionals understand their job and will help you achieve your financial goals.

About PS Group Services

PS Group offers outsourced financial services and support for businesses at all stages of development. Our services are impactful and will help you to achieve your goals. Apply here today to get started.

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Blog Post, Education, Investments

Get an MBA with Post-9/11 GI Bill Benefits

If you've served in the military, you may now be wondering about the next steps for your professional life. Luckily, many new veterans are eligible for the Post-9/11 GI Bill, which helps fund school tuition or job training. Many veterans end up finding passion in business and are able to use the GI Bill to earn a Master of Business Administration degree, kickstarting a prolific career. If you're a business-oriented veteran looking to spruce up your skills with a degree, keep reading to learn how to make the most of your GI Bill to do so.

Why an MBA?

Before we get into the process of using the GI Bill to get an MBA, let's talk about why you should get an MBA at all.

First, you'll make a great applicant. Roughly 4% of MBA applicants are veterans, which adds up to about 5,400 people. That's enough like-minded people to form a solid support network, but certainly a small enough population that you'll stand out from non-veteran MBA applicants. Plus, the military will have instilled in you discipline, an eye for detail, and technical skills that will put you at a great advantage in business school.

Second, having an MBA will broaden your job prospects. Many people, veterans included, think that they can manage a business given their passion alone. While passion will get you a long way, business school training is invaluable. You'll learn specific managerial skills, niche softwares that are standard in the industry, and most importantly, you'll build a lot of connections. Once you earn the MBA, you'll be well equipped to either run your own small business or take over positions at larger companies.

Am I Eligible?

Once you've decided that an MBA is right for you, the next step is to confirm if you're eligible for Post-9/11 GI Bill benefits. The most typical way military personnel become eligible for these benefits is by having served at least 90 days on or after September 11, 2001. However, you are also eligible if you served for at least 30 days with a disability-related honorable discharge, or if you received a Purple Heart after any amount of service. These benefits can also be transferred by a veteran to a dependent child. Eligible veterans can receive up to 36 months of benefits, which may include tuition as well as fees for housing, books and supplies, and moving. These costs vary for each person, though, so visit the official VA website for more info.

Additionally, some veterans may receive additionally benefits under the Yellow Ribbon Program. This is key for those who want an MBA, as Yellow Ribbon can cover out-of-state, private school, and graduate school costs that are not covered by the Post-9/11 Bill. To receive Yellow Ribbon benefits, you must qualify for the maximum Post-9/11 Bill benefits and also attend a school that offers the Yellow Ribbon Program. You can find out more here.

How to Use the Post-9/11 GI Bill

If you're eligible, getting the Post-9/11 GI Bill benefits is pretty simple. First, you'll have to apply for education benefits. You start with a simple questionnaire that determines which forms you must fill out. Once you submit those forms, you will find out about your benefits around 30 days later. Upon receiving your Certificate of Eligibility, you can submit it to your school, who will make a determination on your Yellow Ribbon benefits.

It's as simple as that! With all these potential benefits, you may be able to attend business school and earn an MBA for next to no cost. Then, you'll be poised to pursue your passion and enjoy a profitable career. There is no better time and no better way to get rewarded for your service in the military. For even more financial tips for veterans, stay up to date with the PS Group.

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LLC and Corporations: What Are the Differences?

As an entrepreneur, you need to understand the differences between corporations and LLCs. You also need to understand why there are differences and what impact this may have on your business structure.

In this article, you will learn what LLCs and corporations are and their differences.

What is an LLC?

An LLC, by definition, is a limited liability company that gives the benefits of an incorporated entity to the owners. An LLC functions as a hybrid between a partnership and corporation, giving business owners many of the benefits of incorporating while still maintaining the legal protection of having an LLC versus being completely incorporated.

Main Characteristics That Define an LLC

  1. An LLC is owned by one or more owners, called members. These members are not liable for debts beyond their investment amount, which means that if your business accumulates debt, the creditors cannot come after you personally to collect on the business's obligations.
  2. LLCs have a lot of flexibility when it comes to rules, regulations, and structure. Unlike corporations, LLCs do not have many bylaws that govern operations.
  3. An LLC has limited liability like a corporation. However, unlike incorporating, an LLC member only needs to pay for one share of stock, whereas incorporated entities must purchase at least two or more shares of stock.
  4. LLC's are easy to create; you only need to file with your state and register your business name.
  5. An LLC is not required to hold annual meetings or record minutes of the meeting.

The hybrid nature of an LLC offers businesses a tax structure similar to a partnership. This means that an LLC is taxed as a pass-through entity, which does not have taxes imposed at the business level. Rather, members of an LLC report and pay taxes on their personal returns.

What Is a Corporation?

A corporation is a separate legal entity from its owners. In other words, corporations are self-owned entities that can do business. You establish corporations by filing articles of incorporation with the state department of business along with the initial filing fee. To run a corporation, you must have a board of directors and shareholders.

Main Characteristics That Define a Corporation

  1. All corporations are required to hold annual business meetings (typically in the month of the company's incorporation) to elect officers and conduct other corporate matters.
  2. All corporations must record the minutes of all meetings.
  3. All corporations must purchase at least two shares of stock to be issued. The corporation owns one share while the second share remains with the corporation to name officers.
  4. Corporations have a separate legal identity. This means that the owners of a corporation are not liable for the company's debts or obligations.
  5. Corporations are subject to double taxation. The business is taxed at the corporate level, and then income from the corporation is taxed again when it's distributed to shareholders in the form of dividends.
  6. Corporations are required to have bylaws that govern their operations.

What Is the Difference Between an LLC and a Corporation?

The primary differences between corporations and LLCs are as follows:


An LLC provides limited personal liability, while corporations provide none.

Tax Treatment

Business profits and losses are only recognized by the corporation. There is no difference between business income/losses and individual income/losses (i.e., pass-through taxation) for an LLC.

The Number of Members Allowed in a Corporation

Depending on the state in which you operate a corporation, there may be a limit to how many memberships or shareholders it can have. Most states do not have this limit for LLCs.

The Number of Directors Allowed

States may also have a limit on the number of directors that can be in a corporation. For example, California does not allow for more than five board members. Five or fewer LLCs are governed by this law as well, but other states do not have such restrictions.

Tax Filing Requirements

Corporations must file a special tax form with the IRS to report business profits, called the 1120S. For LLCs, all owners must submit a personal income tax return (Form 1040) and include their share of the profits/losses from the LLC.

Stock Ownership

Corporations can be owned by shareholders or other corporations. An LLC can be owned by business owners and other LLCs.

The Structure of a Corporation

The IRS has very strict rules about how corporations can be structured. This means that you must divide your corporation into departments and positions that match the IRS requirements for all corporations (called "headings"). Most LLCs do not have such restrictions, so it is easier to customize the structure of an LLC.

Issuing Stock

To have a corporation, you must issue stock to owners (called shareholders). This enables them to participate in earning profits and voting on business matters. An LLC can be member-managed or manager-managed, so there is no need to issue shares of ownership.


LLCs are not required to pay income taxes at the business level, but members may have to pay self-employment tax on their share of business profits (depending on the state). Corporations must pay income tax and may also be subject to certain levels of double taxation (paying the corporate tax and individual shareholder/owner's personal income tax).

Foreign Ownership

Foreigners in most states can own up to 20% of an LLC; it is much more difficult for foreigners to own stock in a corporation (foreign ownership limits vary by country).

By understanding the differences between corporations and LLCs, you will better understand what type of structure is best for your business. You can then make an informed decision that is right for your business needs.

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Funding Your Start-up: The Ultimate Guide

Though a start-up is a brilliant idea, its success depends on obtaining adequate funding to begin and grow it. While many investors finance new companies with personal capital or borrow from friends and family, other options are available.

This article provides helpful information to start-up business owners on available financing sources and how to manage their finances.

What Is Start-Up Financing?

Start-up financing is the fund that early-stage businesses apply and use to grow or launch products. This financing comes in various forms, either non-dilutive or dilutive. Dilutive funding requires you to give a portion of your company, as well as including investors and venture capitalists. This option requires investor participation for success. In non-dilutive financing, the start-up owners get to keep control of their company. Financing sources include loans and grants. Regardless of the amount, the start-ups have complete decision-making and power in this relationship.

The Start-Up Financing Options

Getting started with the financing can be challenging for start-ups. However, it is worthwhile if the company avoids financial challenges early on. Here are some start-up funding options investors must know.

1. Bootstrapping Your Business

Self-funding, also called bootstrapping, is an effective financing option, especially when starting a business. First-time entrepreneurs have trouble getting external funding without showing a plan for success and some traction. You can invest from your savings or contributions from friends and family. It's easy to get such finances due to fewer formalities and the low cost of raising the funds.

2. Crowdfunding

Crowdfunding involves raising funds through multiple funders via popular crowdfunding websites. Itprovides start-up entrepreneurs an opportunity to raise funds and promote services or products. A crowdfunding campaign involves setting up a profile on the site, describing the company's business and the amount of funds you need to raise. The people interested in your business donate to your campaign in exchange for some reward (typically one of the services or products, a discount on amounts donated, or other perks) or a share of profit in the business.

When To Use Crowdfunding for Your Business

For your business, you'll want crowdfunding to finance specific projects, not day-to-day operations. For instance, it is a viable financing alternative if you have the idea of a diaper bag and need funding for the prototype. However, this campaign will take off like a lead balloon if you want to rent an office.

To have successful crowdfunding campaigns, you need to rally support for the project. This includes an established social media presence and compelling stories about the service, company, or product. Also, offer meaningful rewards for the donations.

3. Angel Investors

Angel investors are people with surplus cash keen on investing in upcoming start-ups. They also work in networks to collectively screen business proposals before their finances. Alongside capital, they offer advice and mentoring. It happens in the early stages of a company's growth, and the investors expect up to 30% equity. They prefer more risks for a higher return on their investments.

4. Venture Capital for Business

Venture capitals are funds that are professionally managed and invested in companies with high-growth potential. They fund the business against equity capital and exit when there's an acquisition or IPO. VCs provide mentorship, expertise and are a litmus test for evaluating the company from a scalability and sustainability point of view.

5. Funding From Business Accelerators and Incubators

Early-stage businesses consider accelerator and incubator programs as a funding option. Incubators are like parents that nurture businesses while providing a network and training. Accelerators guide start-ups to take the giant steps.

6. Bank Loans

Banks provide two kinds of financing to businesses, which include funding and working capital loans. Working capital loans run a complete cycle of revenue-generating operations. The company debtors and hypothecating stocks determine the limit. Funding from banks involves sharing valuation details and the business plan, along with your project report, to determine loan amounts.

How to Create a Financing Strategy for Start-Ups

As a new business owner, you need start-up financing. However, the financing journey doesn't end when cash is committed. Founders need to understand the revenue and budget milestones attached to the financing rounds.

Moreover, you should create step-by-step plans to achieve them within the right time frame. It requires effective solutions and project management teams to achieve OKRs that the team and funding partners expect you to hit.

To surpass those expectations, you can use the tools below:

  • Gantt chart to visualize the project plans
  • Advanced monitoring and task assignment tools to keep things on track
  • Automated reporting to match results to your valuation and keep investors engaged

Financial Planning For Startups

Investors prioritize brands with a professional organization and risk management, making solid forecasting and project plans critical to winning funding.

Ideally, the start-up business plan should contain forecasts or projections and key elements that inform the actions of your business. They include:

  • Personal financial statement
  • Balance sheet
  • Cashflow statement and forecast
  • Income statement
  • Accounting ledger
  • Supporting documents for insurance and taxation


To take advantage of market opportunities and grow your business, you need outside capital. However, with a plethora of lending options, it is vital to prepare the business for fundraising. Thankfully, PS group are specialists in raising capital to support the next steps in start-ups. We offer a crowdfunding investment platform to grow your company and create consistent momentum. Contact us today to speak to our team.

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Nine Essential Tips For Managing the Finances of a Small Business

Running a small business isn't just about creating and selling a great product or service. Managing finances is an essential element of any successful business. Getting finances wrong can easily doom a small business to failure, so following the right steps in this area is critical. Here are nine practical and important tips for managing the finances of a small business.

Have Enough Capital

Many new small businesses fail because they don't have enough money to keep running. It can be a while before a small business turns a profit. Getting past the start-up phase requires having capital on hand. A good rule is to have enough money saved to cover at least three months of living and business expenses.

Apply for a Loan Early

Many small business owners don't apply for a loan until they are in dire financial straits. By this time, it's probably too late. A business that is failing is unlikely to receive a loan. If there appears to be trouble on the horizon, getting another line of credit before the situation gets out of hand is smart. While some business owners think avoiding all debt is smart, loans can be a key part in succeeding in business.

Keep Business and Personal Accounts Separate

Not all money brought into a business is personal income, so having a separate business bank account makes sense. A single bank account is a recipe for disaster. Simply tracking expenses and taking care of taxes can be a huge problem if a business owner does not keep their personal and business bank account separate.

Review Expenses

Minimizing costs should generally be the goal when running a small business. While some expenses are certainly worthwhile, reviewing costs regularly is a smart, simple way to avoid waste. Looking over costs allows a business owner to identify and cut out unnecessary spending. A frugal, economical attitude toward spending is essential to business success, especially for small business owners.

Take Care of Invoices

Invoices are how a business actually gets the money owed to it. Invoices should be sent out as quickly as possible after the customer receives the goods or is provided the service they paid for. Having a protocol for following up on invoices is crucial. Clients that don't pay promptly (or not at all) are a big problem for any small business.

Have a Filing System

Every small business owner needs a method for tracking their important financial data. A small business can get into trouble if crucial files are not available. Among the files that should be kept are contracts, employee records, tax files, licenses, bank statements, and bookkeeping records. Today, a digital filing system is an easy way to stay organized. Hiring an accountant is wise in certain situations.

Handle Taxes

Handling taxes is much more complicated for a person running a business than for a regular employee. Business taxes are usually complex, so setting aside time to take care of them is smart. Hiring a tax preparer is almost always the best approach. Mistakes when filing taxes can be time-consuming to fix and may come with stiff penalties.

Expand Gradually

Expanding a small business generally means spending more. While growing a business is a good thing, the process is also fraught with risk. Pumping in too much money, too quickly can put a small business in a vulnerable position. Moving slowly is the safer, more sensible approach.

Make Finances a Priority

A basic but essential element of getting small business finances right is simply making them a high priority. A small business owner has a lot to take care of. Other areas of business may be much more rewarding and interesting. Financial matters, for most people, are boring and monotonous to deal with. However, it's the boring stuff in business that can be the most important.

Finances are a make-or-break element of running a small business. Any small business owner who does not recognize this basic reality is setting themselves up for failure.

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How To Start Investing Even If You Aren’t Rich Yet

There is a common myth that investing is something you do once you get rich. After all, money is a rich man's game, right? In truth, the stock market and investment-based financial products are more available to someone living a normal working life than most people realize. Buying a few stocks on the market, savings accounts that gain value based on the stock market, and buying property that increases in value over time are all ways that you can start investing before you have a ridiculous amount of excess cash on hand.

In fact, what often goes unmentioned is that many people who are wealthy today got started investing when they didn't have a lot of money, and that is part of what helped them make the transition to greater wealth. So how can you get started investing if you're not wealthy yet? Let's take a look at some of the most approachable options for early investment.

1) Experiment with Penny Stocks

If you want to get a feel for the stock market – watching trends and predicting the rise and fall of company stocks – start with the penny stocks. These are stocks that cost far less than a dollar per share, meaning you can pick up a few dozen shares of a few dozen companies to start your first portfolio. Most of the time, penny stocks won't make you a lot of money, but making $5 off of a $2 investment is also great practice for carefully selecting larger stocks to invest in and earn gains from later on.

2) Open an Investment Savings Account

Not all investments require you to manage a stock portfolio or know anything about smart investing. Many savings accounts, especially those designed for long-term savings, are managed using investments. The bank quietly invests the money you spend and your interest rate and/or returns are determined by how well those investments do. Considering that financial institutions are experts at safe and profitable investments, this is a great way to get started benefiting from investments with only the account minimum to get started.

3) Invest a Steady Amount Each Month

Whether you are investing in stocks or through investment-backed savings, the best way to build wealth with your investments is to invest steadily. Treat your investment plan like your retirement savings. The more you put in, the more you can make back. Let's say you put in $100 into a portfolio of modestly priced stocks to start with. If you put in another $100 each month, or even less, when the value of those stocks rises to profit, you'll have more stocks and make greater gains over time. With stable investments, this acts as a savings account and a source of slowly self-generating funds.

4) Maximize Your Retirement Contributions

Did you know that many employer-managed retirement accounts are investment-based? Your 401k, for example, is usually invested in a selection of mutual funds along with the money from other retirement accounts with your employer. You can gain the benefit of those safe investments (and increase your retirement funds) by maximizing your retirement contributions. Put in as much as you can financially or legally each year so that the returns build up into a larger total sum.

5) Robo Advisor Investment Apps

Many people are getting started investing through a new wave of stock market mobile apps called Robo Advisors which provide basic automated advice on funds and stocks by sector that will make stable, safe investments. You tell the robo-advisor your budget and investment priorities, and it makes suggestions or offers to build you a basic portfolio with your funds. This is a great way to get your first experience in investing, though robo-advisors are rarely used for more experienced, strategic, or larger investments.

6) Buy a Treasury Bond

Treasury bonds are rarely mentioned alternative for long-term investment. These provide a fixed rate of interest and a set duration. When the duration is done, you receive your investment plus the interest, guaranteed. They are the most reliable investment because the payout is guaranteed instead of relying on a company's stock market value, however, most stable funds are comparably sure.

7) Invest through Property

Finally, you can also invest through various types of properties. Buying a house is one type of investment that many people choose for personal and lifestyle reasons. From there, you might invest in rental homes for a source of income and long-term property value investment. Some people find success through investing in collectible items that are guaranteed to gain value over time, though this method is based strongly on niche markets and discontinued products.

You don't have to be wealthy to begin gaining wealth from investment. It only takes a small initial investment to begin building a portfolio or start a savings account that will begin growing gains through safe, positive trending investments. Are you ready to start your first investment strategy toward long-term wealth? Contact us today.

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ETF’s Offer Diverse Baskets of Investing Opportunities

Exchange-traded funds (ETF) are not a new concept. In fact, ETF's have been around for 20 years. Yet, its sudden popularity has put the funds on the map as a desirable alternative to traditional mutual fund-type investments. Nasdaq recently reported that a mind-numbing $507.4 billion was poured into U.S.-listed ETF's during the year. This represents an astounding increase of 55% over 2019. Additionally, the article reported that, in the first quarter of 2021, approximately 83 ETFs have been added to the 318 that were launched in 2020. About 60 ETFs have already surfaced in the second quarter of 2021, Investopedia reports.

ETFs enjoy several advantages over mutual funds, which account for their current popularity. An ETF is an exchange-traded fund that is similar to trading stocks, mutual funds, or bonds. As is the case with securities, ETFs can be bought and sold throughout the day. One big advantage ETFs have over stocks and other investment vehicles is lower fees. Depending on the type, ETFs have varying levels of risk. With ETFs, the fund provider owns the underlying assets. The fund manager then designs a basket and tracks its performance. From there, the manager sells the fund's shares to the ETF investors.

ETFs Offer a Diverse Investment Opportunity

According to Bank of America's website, ETFs come in a broad variety of types, each focusing on various investment strategies. The most popular ETF investment strategies include:

  • Diversified passive equity ETFs - Focuses on specific markets like the S&P 500, the Dow Jones Industrial Average, and the MSCI Europe Australasia Far East (EAFE) indexes.

ETF Bonds never mature. That means that they don't afford the investor the same protection in the same way that individual bonds do. There are no assurances that you'll get your money back in the future. Rising interest rates are detrimental to the bond market. Conversely, falling fixed-rate bonds become more desirable, adding to an increase in demand due to rising bond prices.

Bond exchange-traded funds encompass baskets of diversified debt instruments that include both long and short-duration bonds. These bond ETFs also employ other products to boost returns, including interest rate swaps, convertible securities, floating rate bonds, and other alternative strategies.

  • Niche passive equity ETFs - As with diversified passive funds, these niche portfolio funds are generally made up of the same stocks as those used to calculate particular reference indexes.

A big advantage to passive equity ETFs is lower expense ratios when compared to those afforded by mutual funds. Passively managed portfolios are tied to an underlying index or market sector. Mutual funds, for example, are more actively managed. Due to the fact that actively managed funds don't commonly beat the performance of indexes, ETFs offer a better alternative to actively managed, higher-cost mutual funds.

  • Active equity ETFs - Are a different kind of animal from Passive ETFs. They allow their managers to use their own judgment in selecting investments, rather than rigidly pegging to a benchmark index. Active ETFs may offer the potential to outperform a market benchmark, but may also incur greater risk and higher costs.

Actively managed funds generate higher fees, as a result of greater activity required by analysts, researchers, fund managers who actively buy, hold and sell stocks to achieve maximum returns. Any fund which is actively managed by a fund manager is an active fund. The fund manager actively makes decisions on how to invest a fund's capital and conducts the trading of stocks.

  • Fixed-income ETFs - focuses more on bonds rather than stocks. Major fixed-income ETFs tend to be actively managed, but have relatively low turnover and generally stable portfolios.

Just as with the case of mutual funds, fixed-income ETFs may provide a convenient way to diversify a bond portfolio to spread out the risk. It entails the ability to easily diversify different bond issues in a single transaction.

Which ETF Strategy is Right For You?

According to Forbes Advisor, the most exchange-traded funds are passively managed vehicles that track an underlying index. Only about 2% of the funds in the $3.9 billion ETF industry are actively managed, offering many of the advantages of mutual funds, but with the convenience of ETF investments. The Forbes article advises that buying active ETFs is a great way to include active management strategies in your investment portfolio. However, be aware that this tactic may incur higher expense ratios.

Regardless of which direction you choose in your ETF investment, it's important to exercise your due diligence in making your selection. For more advice on the ETF landscape, contact us.

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Blog Post, Investments

Should You Pay Off Debt or Save For Retirement First?

Paying off debt and saving for retirement are both critically important goals. If you don't pay off your debt, your financial life will eventually be ruined. Debts are particularly nasty because interest means the problem gets worse over time. Over time, debt can result in bankruptcy. On the other hand, failing to save for retirement has dire consequences as well. Not having enough saved up for your senior years can result in an awful quality of life and a miserable old age.

The question, then, is which one is more important. Which takes precedence? Should you pay off your debt or save for retirement? While, ideally, you will ultimately both pay off outstanding debts and save up enough for a comfortable retirement, there is still the matter of which one to tackle first.

Unsurprisingly, which one to take on first depends largely on circumstances. The complexity of financial matters means there are few hard and fast, absolute rules when it comes to how individuals should handle their money. However, there are certainly some general guidelines you should know.

Set Up An Emergency Fund

There's actually a key step that you should take care of before either paying off debt or starting to save for retirement. That is to set up an emergency fund. Emergency funds are enormously important. The possibility of a sudden major expense cropping up is always present. You have to be prepared for such exigencies as a surprise medical bill. Job loss and car wrecks can also mean you need to rely on an emergency fund. You should aim to have between three and six months' worth of salary in your emergency fund.

Make Minimum Payments On Your Debt

How much of the debt you owe you should pay off versus how much you should invest for retirement can be tough to determine. However, most debts have a minimum amount you must pay per month. Paying this minimum, as the word 'minimum' suggests, is the least you can do without getting into serious trouble. Penalties such as late fees will generally accrue if you do not meet the minimum threshold. Avoid major financial distress by always making minimum payments.

Evaluate The Debt You Owe

Different debts have different interest rates. Certain types of debt are generally more damaging than others. Credit card debt, for example, is especially harmful. Credit card debt usually has an interest rate of at least 15% APR. At this appallingly high rate, you are on your way to financial devastation. Any debt you have with such high rates must be paid off as quick as you can. Go through all the debt you owe and resolve to tackle the debts with the worst interest rate starting immediately.

Prioritize Retirement Saving Over Low-Interest Debts

Now you know what to do with those high-interest rate debts: pay them off. But what about debts with much lower interest rates? For example, direct unsubsidized graduate student loan debt interest rates are currently below 5%. While the average mortgage interest rate varies enormously over time, it is at present at a very low rate. If you owe debts of these sorts, there is no need to hurry to pay them off.

That's because when you are considering whether to invest money for retirement or to pay off a particular debt, what you are really comparing is the interest rate on the debt versus the expected return for the investment. If the interest rate for debt is lower than what you can expect to get from investing in the stock market, it makes sense to invest money for retirement first.

Now, stock market returns can, of course, vary wildly. Sometimes, the market even goes down for extended periods. However, if you are investing for retirement, you are in it for the long haul. That means that when comparing a debt to the possibility of investing for retirement, you should use the average annual return over the decades, which is roughly 10%. Use this value and your individual circumstances to evaluate whether to put money towards your debt or your future retirement first.

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