Business Accounts – what you can invest in

by InvestEngine

For a lot of small business owners, investing is an overlooked opportunity. Often, the problem is that businesses either don’t know that investing is a viable option, or they don’t know specifically what to invest in. 

According to reports, there is as much as £150 billion sitting in SME current accounts that offer no interest at all, while a further £125 billion is in accounts that do offer interest, but offer smaller interest rates to smaller companies. 

Our Business Accounts offer a solution — they invest in the stock market, giving the opportunity for higher returns than a traditional savings account. But what exactly can businesses invest their money in, and how do they do it?

What can businesses invest in?

A business’ choice of investments will depend a lot on its circumstances. These considerations are: 

  • How long you plan to invest for
  • The level of return you want to chase
  • How actively you want to manage the investments

Generally speaking, business owners will favour shorter-term investments because it can be difficult to predict when you might need to use some of the cash. They’ll also want to avoid any unnecessary risk to their hard-earned business income. 

So, businesses often favour investments that:

  • Allow them to access their cash when they need it
  • Don’t come with too much inherent risk
  • Offer them the chance to beat their bank rates

Where ETFs come in 

Exchange-traded funds (ETFs) are a great option for businesses. They’re relatively low risk, they offer easy diversification and they allow for hands-off investing over the short and long-term. We’ll go into what they are and why they’re great at the end of this article, but it’s an investment type that all businesses should consider. 

Alternatively, leave the investing to us. Our Managed portfolios charge just 0.25% a year, so you’re free to focus on the other important areas of your business. Find out more about Managed portfolios

Find bank beating returns with money markets

For a lot of businesses, investing will be about beating the growth rates offered by their bank. Rather than simply allowing cash to be eroded by inflation, putting it to work in (relatively) low risk investments is often an easy decision. 

This is where money market ETFs can offer a simple, effective solution. They can offer rates of 5.2%, way above those offered by most bank accounts. 

A money market fund is a type of fund that invests in debt securities which carry short maturities and minimal credit risk with the objective of giving you a higher return than cash.

These funds are typically made up of short-term debt from governments, banks, and companies with strong balance sheets and investment-grade credit ratings. This means they offer more stable returns compared to other bond funds. 

Why consider these funds now?

Given their low risk, these types of funds can be a good place to park your business cash. A money market ETF allows businesses to look for returns until they decide to use the cash somewhere else. 

With interest rates likely to remain high for some time, these types of funds are becoming more popular and are, themselves, a good alternative to a savings account. 

Currently, the Bank of England’s SONIA rate, which money market ETFs aim to track, is 5.20%*. 

*Variable annual rates are correct as of 29/04/2024.

What else can I invest in?

As well as money market funds, there is a wide variety of options out there for businesses looking to invest. 

At InvestEngine, our range offers instant access to major markets like the S&P 500 and the FTSE 100. We also offer more thematic options, with investors able to invest in growing markets like artificial intelligence, or classics like physical gold.

We offer hundreds of ETFs – we’ll get into what these are and why they’re great in just a second – on our platform, so you can build a portfolio that matches the ambitions and the expertise of your business. 

What are ETFs and why are they useful?

An ETF is a type of fund that is traded on stock exchanges. Rather than investing in individual stocks, an ETF is a basket of securities that can contain hundreds or even thousands of companies. 

ETFs are made to track indexes. This means you can invest in an entire market in a single transaction. 

Why we recommend ETFs

  • They’re low-cost. ETFs have some of the lowest investment costs around, so more of your company’s cash can be put to work. 
  • They’re varied. Invest in whatever industry, theme, geography or index you like. Whatever your area of focus, we have an ETF to cover it.
  • Zero stamp duty. Most share purchases in the UK are subject to 0.5% stamp duty. With ETFs, you pay nothing. 
  • They’re easily bought and sold. Your cash isn’t locked away when you invest in ETFs, so you can buy and sell freely. 

So, it’s time for businesses to take action and get more from their money. Rather than leaving cash reserves to be eroded by inflation, give yours the chance to grow by investing in ETFs.

How to invest for your business

Check out our video with PensionCraft’s Ramin Nakisa, who explains how businesses can actually go about investing, from the options available to how they get started.

Important information

Capital at risk. The value of your portfolio with InvestEngine can go down as well as up and you may get back less than you invest. ETF costs also apply.

This communication is provided for general information only and should not be construed as advice. If in doubt you may wish to consult a professional adviser for guidance.

Tax treatment depends on personal circumstances and is subject to change, and past performance is not a reliable indicator of future returns.

You may also like