How should business owners invest? – Kiplinger’s Personal Finance

by | Oct 30, 2022 | Business

As a business owner, you often face a very different set of financial risks than your non-business-owning counterparts. When it comes to investing, there are two major considerations you’ll need to remember. First, keep your powder dry. This is an old seaman’s term that I like to use when describing the need to keep enough cash in your personal and business finances to weather life’s storms.The other consideration is that you likely have heavy concentration risk. In other words, most of your net worth is tied up in your business. For the purposes of this article, let’s assume that you have enough dry powder. Let’s also assume you’re like the majority of business owners and you’re dealing with significant concentration risk. With these things in mind, we want to answer the question, “Why do business owners need to invest differently?”A Huge Red FlagWell, if I were to look at a client’s portfolio and see that they have 70% or 80% of their funds invested in a single business, that would raise a huge red flag. That tells me this client is open to an enormous risk should that holding suddenly decrease in value. Yet this is exactly what is happening with business owners all over the world. 

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