How to Invest your Company’s First Profits in Mutual Funds

With the start-up boom in India, entrepreneurial ventures and private initiatives have managed to grow and evolve profitably. Most new investments and commercial projects have stood the test of time, gradually turning profitable. So, as a founder, it is crucial for you to decide what to do with your company’s first profits.There are numerous investment avenues, such as Fixed Deposits (FD) , Mutual Funds (MFs), insurances, stocks, bonds, and shares. Yet, there is not enough information available to aid you in picking the right product or help you understand the complicated investment processes pertaining to business investments.

Before finalizing any particular investment avenue, it is vital for you to analyses your company’s short-term and long-term goals. Investing the profits back in your own company is and will always remain one of the most preferred ideas for reinvesting the company’s first profits. There are many ways to invest money and make profits, but your company goals have to be the deciding factor.Reinvesting the profit back in your own company will help you grow the business and expand at a faster pace. Yet, at the same time, it is imperative for you to make investments elsewhere to minimize your personal risk and diversify the company’s finances. After making some basic investments in secured mediums, mutual funds are the best option to ensure returns.Companies are increasingly moving their profits and reserve capital into mutual funds to meet the short-term as well as long-term requirements of the company while generating good returns. Investing company profits through MFs may also be done by tax-saving funds or by “sectors” wherein the investment is made in companies, related to a single business type.The process for investing in mutual funds for a company is similar to that for individuals. Your company will have to submit a KYC which will require documents such as balance sheet for last two financial years, shareholding pattern, certificate of incorporation, details of the directors, and board resolution for investment. It is mandatory for the board to pass a resolution allowing the board of directors to invest in mutual funds schemes.There are several investment avenues wherein you can invest money for profit. However, strictly from a business standpoint, allocating budget for marketing, hiring, outsourcing, talent development, and inventory management will lead to long-term success of your company. A combination of investing in mutual funds and developing your company will result in improved profit as well as productivity.

The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.