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Dollars and $ense: Investing advice for the business owner


Business owners possess an entrepreneurial mentality that allows them to take risks that would keep most people awake at night. In doing so, they fulfill the dual roles of fearless risk-taker and wise corporate leader.

One would assume that the qualities of being a successful business owner would also make you a successful investor. Not so fast. As an investor, overconfidence can lead to your eventual undoing as can allowing your emotions to unduly influence your investing decisions. Check your competitiveness at the door and remember that you cannot beat the market. Investing takes patience, hours of research and study, execution without emotion and the understanding that sometimes the best action to take is no action.

It is important to stay involved in the investing process. Remember that one of the best things you do as a business owner is to constantly ask questions, probing for a new or different approach. Plan on devoting the same level of energy and commitment to managing your investments that you do to building your business.

Understand that some of the qualities (vision, decisiveness, willingness to take risk) that made you a successful business owner will translate well into your role as investor. Develop an asset allocation plan that balances risk and return and considers the fact that you are taking large risks everyday as a business owner. Accept risk with your business and manage risk with your investments.

Choose an investment advisor that understands you. Look for an advisor who understands the demands of and risks associated with being a private business owner.

Keep these tips in mind as you construct and manage your investment portfolio: 1. Save for a rainy day. Some businesses fail. Look out for yourself and your family and commit to a routine of saving and investing for the future right from the start. Avoid the temptation of sinking your last cent into your business. Understand the types of small business retirement plans (examples include SEP and SIMPLE IRAs and a Self-Employed 401(k) Plan) that may be available to you.

2. Look long term. Good investing occurs over years and business cycles, not from one quarter to the next. Learn to temper your reactions to changing market forces. 3. Keep your investments simple. Your business may be complex, your investments need not be. 4. Stay away from investing fads. You did not build your business by taking shortcuts, so avoid them as an investor. Develop an investment plan that suits your objectives, risk tolerance and investing time horizon. Focus on getting size (large, mid, or small cap), sector and region/country right.

5. Do not gamble. Derivatives (like options) are speculative instruments best suited for industry pros. 6. Minimize fees. A business constantly looks for ways to reduce its cost of operations. So do smart investors. 7. Consider the impact of taxes. Keep your accountant informed throughout the year of realized capital gains and losses from your investment accounts. 8. Avoid margin. Use leverage to grow your business, not buy stocks and bonds. 9. If you sell your business, congratulations. If you end up with a large position in the acquirer’s stock, evaluate hedging and monetization strategies to diversify the concentrated stock risk.

Rick Welch is a Registered Investment Advisor (RIA) and chief investment officer of Academy Wealth Advisers. He can be reached at 215-603-2976 or

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