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Investing as one of the ways to achieve reasonable enrichment is a common principle of financial resource allocation. At the same time, not only business participants in the market but also individual entrepreneurs often invest money in particular projects to obtain a stable profit. Although certain skills and knowledge in this area are required to accumulate and augment funds, many people sacrifice personal capital intentionally for a subsequent enrichment.
To avoid costs or losing all the invested money, it is essential to be guided by specific principles that will make it possible to achieve profits and to distribute existing assets rationally. In particular, the share of seed capital should be sufficient for investing in a given project. Also, knowledge of the specific characteristics of the financial market is required, for instance, payment schemes, exchange and banking systems, and other important aspects. Finally, the principles for minimizing risks should be carefully studied. In this way, seed capital, information about the operation of monetary and currency systems, and the principles of risk management are crucial factors that enable the investment of money as safely as possible.
Following the principles of the modern financial environment, sufficient seed money or start-up capital is an integral component of successful investing. As Bocken notes, in the process of competition in a certain sphere, the size of the initial contribution is an important aspect (654). This indicator influences the development of relevant activities and promotes rapid and effective growth. Moreover, the share of available funds is directly proportional to the cost of equipment, raw materials, marketing programs, and other factors that are necessary to take into account when starting a business. Accordingly, the more funding that will be spent on promotion, the higher the chance that the profit will be substantial.
Orientation in Financial Systems
Regardless of the timeframe for investment objectives (short-term or long-term), it is essential to have at least a basic understanding of the functioning of financial markets, payment systems, bank commissions, and other conventions. Without knowledge in these areas, losses may arise through clumsy asset management. For instance, according to Zhong et al., “planning stock options” can be diverse, and to build a reasonable investment strategy, they have to be studied in detail (354). Payment systems may differ significantly since today both electronic currency and ordinary money are used. Therefore, when beginning to invest in a certain project, it is crucial to prepare and understand the specific characteristics of cash flows.
The principles of risk reduction are valuable for protecting assets from unforeseen threats such as bankruptcy. Traditional accumulation is the least risky form of saving money (U.S. Securities and Exchange Commission 6). Nevertheless, it should be noted that this process can be quite long and require austerity. Often, the formation of capital results from the sale or pledge of real estate, subsidies, or bank loans. At the same time, as LaPonsie argues, certain investment strategies, specifically fixed-income funds, can contribute to constant accumulation. In turn, this will protect a business against risk and help it to achieve a stable income.
Start-up capital, knowledge of current payment trends, and compliance with the principles of risk management are essential conditions that should be taken into consideration when planning to invest money. Using the right strategies for spending and saving makes it possible to shelter a business from risk and achieve a stable profit. Regardless of the timeframe and the number of funds invested, preliminary consideration of current market opportunities is mandatory.
Bocken, Nancy M. P. “Sustainable Venture Capital – Catalyst for Sustainable Start-up Success?” Journal of Cleaner Production, vol. 108, 2015, pp. 647-658.
LaPonsie, Maryalene. “How to Invest Your Money for the Short and Long Term.” U.S. News. 2018. Web.
U.S. Securities and Exchange Commission. “Saving and Investing: A Roadmap to Your Financial Security Through Saving and Investing.” Web.
Zhong, Hao, et al. “Which Startup to Invest in: A Personalized Portfolio Strategy.” Annals of Operations Research, vol. 263, no. 1-2, 2018, pp. 339-360.