Owning your own business is a dream and sometimes a nightmare. I love owning my own business, and I wouldn’t have it any other way. You may already own your own business or just deciding to start one, but it is important to address the financial needs for every stage of your business life cycle. I want to discuss what I think are the most important Six Keys to Maximizing Wealth for Small Business Owners. I will go over each of the six keys in the coming weeks. Today we will discuss the first-Diversify Your Investments.
Business owners have a habit of putting all their assets in their business. It’s what they know best. The problem is that exposes them to a lot of risk. Thousands of businesses fail every year and along with them the fortunes of the owner.
In the investment world, diversification means reducing risk by investing in a variety of assets. You may have heard the old proverb “don’t put all your eggs in one basket.” By placing your assets in different “baskets” you reduce the risk in losing all of your investment.
Diversification for business owners means not putting all their capital in the business. Business owners should diversify by type of business, asset classes, investment portfolio and retirement assets. If there is a downturn at your company or industry, both your business and the investments could fall at the same time.
For your portfolio, use asset allocation, an investment strategy that attempts to reduce risk by diversifying your cash among stocks, bonds and alternatives. Because different sectors of the market move in different patterns, asset allocation seeks to reduce the risk of major losses and increase the opportunity for solid returns.
To get the remaining tips on how to Diversify Your Investments, download my eBook Six Keys to Maximizing Wealth for Small Business Owners today.