Investing in startups comes with a unique risk tolerance requirement. Startups are businesses in their infancy. As a result, they promise the potential for great upside, yet can’t always deliver. Investigating the foundational financial metrics and the product or service that any given startup offers to its clients is a must for investors considering getting in on the ground floor.
Understand the risk
As with any investment opportunity, a startup provides a balance of risk and reward that lies somewhere on the spectrum of tolerance that any investor will maintain for themselves. For younger investors, larger risks are a good thing, while older investors may want to temper their risk tolerance as they get closer to retirement age. This is because riskier investments provide you with better potential upside, but come at a greater margin for error.
Startups can go bust far more easily than an established brand name, resulting in losses of medium to large magnitude—depending on your investment in the business and timing of your potential exit from the investment. For a twenty-something, investing in a few assets that may return zero or negative growth is OK because there are many others that will boom in your portfolio over the long timeline that exists between the present and your future retirement date.
Many investors are buying into brands that deal in cutting-edge technologies and service areas that are growing in the present market. A gummy vitamin manufacturer, for instance, may be a great opportunity for an investor that’s done their homework on custom formulation vitamins, supplements, and FDA approval standards. The gummy industry is growing into something unique as more and more adult vitamin and supplement products hit the market. In years past, gummy supplements were often reserved for children’s vitamin products, but in the present market, CBD brands and other supplement manufacturers are utilizing the gummy format for tailored dosage and ease of use for their clients. It’s a great space for investors looking to get into supplements as the baseline for delivering the supplement ingredients to the human body.
Blend startups with established brands for increased stability and upside potential
The best way to capitalize on all the upside of startup investments is with a blended approach. Investing in startups and other small-cap companies can create massive growth, but hedging against intermittent downward momentum with other industrial sectors and larger companies is a great way to build a rock-solid portfolio that can weather any market conditions. Alamos Gold Inc. (NYSE:AGI) is one brand name that is making huge waves in the gold mining industry and can provide this stability that you’re seeking for the long term.
Alamos Gold is a pioneer in the industry because of its various sustainability measures that are changing the landscape of mining and mineral extraction. In addition to Alamos’ expanding footprint (with additional mining sites set for operation in Sonora, the Republic of Turkey, the United States, and Northern Ontario) Alamos has eliminated the use of cyanide and other chemical products that have routinely poisoned surrounding groundwaters as a result of routine gold ounce and other mineral extraction processes that mining companies have utilized in the past. As well, Alamos is working toward sustainable power sourcing at each one of the mining sites: the Young-Davidson and Island Gold Mines in Northern Ontario and the Mulatos Mine in Sonora, Mexico.
With the right approach to incorporating startup brands into your portfolio and a strong foundation that can support them as they continue to grow toward the hoped-for price appreciation, making the most of your portfolio’s assets is a simplified task.
