Mobe Products Tips – An entrepreneur’s company is probably his biggest investment. Any personal retirement investment strategy needs to take that into account.
The concept of a diversified portfolio means a bit differently for an entrepreneur than it does for someone who works a day job.
The significant amounts of time and (probably) money that we have been allocated in businesses are really no different than financial investments we make elsewhere (e.g., the stock market or real estate). In both scenarios, we hope—and work—for high returns.
Not all small businesses enjoy steady and dependable growth, so your outside investments for retirement need to be more secure and of a lower risk profile. Here Mobe Training are seven ways to keep your investments safe and make them grow:
1. Protect What’s Yours …
Don’t wait until you get into trouble to take protective measures. Be proactive in taking steps to protect your assets, including your business, from lawsuits and other potentially detrimental actions.
An example of this is carrying a liability insurance, which protects your customers and business partners from damages caused by your employees and product. Another option would be to structure your business so as to reduce or eliminate potential personal losses. You can learn more about it in this article on the MOBE website.
2. Hands Off
To avoid the temptation to cannibalize your investments every time your business needs a quick cash infusion, create a “hands off” portfolio for your index funds, stocks, etc. that you will leave alone no matter what. Better yet, dump as much cash as you can into retirement vehicles like Roth IRAs or into your children’s college education. These accounts usually have considerable penalties for early withdrawals and access.
3. Diversify Opposite to Your Industry
When thinking of diversifying your wealth, include your company. Then invest in areas that are a little different to your industry or business. Of course, this will depend on what your line of business is, as it might not be an issue at all.
However, if your business is in some way reliant upon or tied to a larger economic entity, such as one or other commodities, you may want to shift your investments in areas that run opposite to the ups and downs of those markets. A professional advisor can help you choose what might be the best countering strategy.
4. Take a Conservative Approach
Investment advisors usually recommend choosing investments with greater equity for young investors, while structuring a portfolio with a greater amount of fixed-income investments are best for older investors.
For entrepreneurs, the business itself is the equity-risk part of their portfolio, so for the sake of diversification, they should balance it by taking a more conservative approach with their outside investments.
5. Create a Fund for Future Business Ventures
It’s likely that your interest in entrepreneurship just won’t end with your business. And the longer you’re in business, the better able you are to recognize an excellent deal. Regularly save a part of your revenues to build up a cushion you could fall back into or use for other ventures, so that you’re ready to pounce when a great opportunity comes along.
6. Invest in Your Business’ Further Growth
As your business grows, you will discover potential partner industries that can assist your production or delivery or help you leverage your company’s core strengths.
This is where growth lies, and failure to take an interest in adjacent markets or industries will reflect a slowed growth over time. The “80/20 Rule” applies in this scenario, in which 80% of your resources would be devoted to your core business, while the other 20% should be allotted on new opportunities invested in similar enterprises. These may be your best investments—the ones that help you grow your primary business.
7. Create a Sustainable Business Model
As mentioned at the beginning of this article, your business is itself an investment and, if successful, it may be your best retirement strategy. While it may be a “no-brainer” statement, the best path to a sustainable business model is working for long-term profitability and always building that income potential. Remember, that there has to be a balance of investments to avoid a drain in profitability.
No one knows your business like you do, so rather than devoting time and attention to other investments, it’s probably best for you to devote your time to making it as strong and lucrative as it can be. Let a professional guide you through the remainder of your other investments.
In short, it’s all about balancing your business investment with your other personal financial assets.
Nothing in this article should be construed as an investment advice, as we are not investment advisors. Rather, this information represents thoughts about how entrepreneurs might approach the subject of their personal investments.