img-background

4 Reasons Why People Rather Invest Than Start A Business

Investment ventures boomed exponentially in the last decades. But, why do people prefer to invest rather than start a business?

4 Reasons Why People Rather Invest Than Start A Business

See the following links if you'd like to skip to specific sections.

Investing is one of the growing practices in business and finance industries today. Because of the boom and the growth of different investment ventures in the last decades, investing has been established as a promising option for financial growth.

Cryptocurrency to stocks to bonds, different options are available for people to invest on, which contributes to further enthusiasm and interest of the public to try. The media attention (by both media outlets and social media sharing) investment news gets today has also led it to become almost like a craze, as it projects gains and success beyond your imagination.

Taking one of the newer but most successful types of investments cryptocurrency- as an example, the cryptocurrency Bitcoin started from $0.0008 in value in 2020 to $40,000 in just a decade in 2021. Victories such as these inspire many investors to dive into investing.

From the win of Bitcoin and many other companies that made big leaps in the market, it is also a known fact that any type of investment is risky and volatile. People can suffer from big losses as much as they enjoy big wins. Not to mention the emerging numbers of frauds and scams that lead people to lose huge amounts of funds.

If we compare it to the previous decades where the more common form to acquire extra funds is by starting a business, investing is more of an external activity that separates a person from a wide array of processes. But on the other side of the coin, it is also more unpredictable. 

So, why do people prefer to invest rather than start a business? Here are some of the reasons why:

Investing Requires Less Legwork

Investing Requires Less Legwork

One of the most obvious reasons why people rather invest in businesses than start one is because it requires less work. A new business goes through a lot of processes. It needs continuous efforts of generating ideas, submitting paperwork, pursuing marketing efforts, and maintaining good customer service.

In more general terms, managing a business can be more stressful for someone. This gets more complicated when different industries today are getting more and more competitive and so improving and optimizing should always be prioritized. 

Business requires more attention and, in a way, passion for developing ideas. These are not necessarily expected for investors, as they are seen as contributors that support businesses instead.

Investing Requires Less Knowledge on Finance

Investing Requires Less Knowledge on Finance

To set things straight, investing requires great knowledge and understanding as well. One needs to be able to make mindful and smart decisions to be able to grow their investments, and proper judgment is made possible by being well-informed.

However, if an amateur investor and a startup business owner are compared, it can be assumed that an entrepreneur pretty much has an idea of how businesses and industries work. An investor who does not have the time to fully immerse themselves into commerce can easily get help from a broker or a financial advisor.

Despite both having an important part in businesses, an entrepreneur is expected to have the necessary knowledge and skills on structures and models to keep their business afloat more than investors. 

This is the reason why business people either go to business schools, experience years of trial and error, and find a mentor. Luck does not necessarily play in business - it's always a matter of the right strategy.

Investing Offers More Flexibility

Investing Offers More Flexibility

Because less work and knowledge are expected from an investor. This gives them more leeway to be more adventurous and experiment on their decisions which a business owner cannot afford to have especially with financial capabilities and competitiveness in mind.

Getting funds from investment gains is considered a passive income. This means that money will come to you without you shedding a sweat. This is not the same case for small businesses that constantly have to put efforts towards success. 

Startups may have to put more work and effort into stabilizing their business, especially when the business is young. And so, there is little to no space for breaks and errors.

With these in mind, this just means that an investor can afford more vacations, more mistakes, and more liberty when it comes to maintaining improving, and diversifying their financial situation. 

Investing Does Not Require Long-Term Commitment

Investing Does Not Require Long-Term Commitment

Making a business successful takes time. Sometimes, it is too much time for small businesses. In data from the U.S. Bureau of Labor Statistics, 20% of businesses shut down after their first year in operation, and only 50% remain after 5 years. 

This shows that aside from effort and knowledge, time is also an important factor in keeping a business thriving. 

While an investor can easily put and pull funds into whatever they invested in, an entrepreneur puts their efforts into the long haul. Decades or even centuries of dedication to a business is one of the main reasons why big and successful companies made it to wherever they are.

Overall, when it comes to running a business, the many processes and people that are involved make it impossible to make rash decisions for any person managing it.

Key Takeaway

4 Reasons Why People Rather Invest Than Start A Business

The future of investing is promising from different perspectives. Companies thrive because of it, and more individuals are achieving financial freedom from it as well.

And because industries and individuals alike are succeeding, it contributes to a bigger economic growth that is evident if the global market is considered.

And while people can also fulfill their goals towards financial success through starting a business, making investments is deemed as an easier way to achieve them by many.

Investing requires less leg work and knowledge, offers more flexibility, and allows short-term commitment. Thus, many people see it as less taxing to venture on. For people who like to juggle different things at once, having an option that is more relaxed and fluid to changes is the way to go.

At the end of the day, businesses and investments go hand in hand in making an economy thrive. A good amount of both leads to a better business-consumer relationship that helps not only economies but societies among nations too in general.

What You Should Read Next

The following articles are related to 4 reasons why people rather invest than start a business.

Marketing your brand, your products or services are quite challenging during this pandemic. Learn the 5 ways to improve the business during the pandemic.

80% of investors quit after 2 years and after 5 years, only 7% remain in the trading industry. Here are common mistakes investors make you need to avoid.

Fintech offers a lot of potential for small businesses during a pandemic. Find out how small businesses can use fintech to stay afloat in a health crisis.

COVID-19 has disrupted a lot of businesses around the world. Both small startups and Fortune 500 companies have been affected by this dangerous disease...

img-background
Adrienna Borda
Adrienna BordaMember since
Sep 01, 2021
Loading...
Did you find this helpful?
Leave your Comment
Loading...
Contact us now!
Loading...