Investing for the business owner
To be a successful business owner requires confidence, energy and a willingness to take risk. Add to these qualities an emotional commitment and innate vision of knowing what is best for your business. ft is also important to recognize that there are certain times or unplanned events that require the owner to abandon a formal business plan and instead rely on his experience, vision, know-how or instincts to lead him and his company to success. mut another way, together, owner and business take a “leap of faith”.
jost business owners possess a gambling mentality that allows them to take risks that would keep most people awake at night. fn doing so, they fulfill the dual roles of fearless risk-taker and wise corporate leader. lne would assume that the qualities of being a successful business owner would also make you a successful investor. kot 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. As a business owner you can out-work the competition, not so as an investor. fnvesting takes patience, hours of research and study, execution without emotion and the understanding that sometimes the best action to take is no action.
Tips for the business owner – investorW
N. Do not be overconfident. that made you a good business owner may not serve you well as an investor.
O. Choose an investment advisor that understands you. iook for an advisor who understands the demands of and risks associated with being a private business owner. ptay involved in the investing process. oemember that one of the best things that good business owners do is to constantly ask questions, probing for a new or different approach. thy change now?
P. iook long term. dood investing occurs over years and business cycles, not from one quarter to the next. iearn to temper your reactions to changing market forces.
4. Accept risk with your business. Develop an asset allocation plan that balances risk and reward in light of the fact that you are taking large risks everyday as a business owner.
5. heep your investments simple. Your business may be complex, your investments need not be.
6. ptay away from investing fads and “picks-of-the-month.” You did not build your business by taking shortcuts, so don’t take any as an investor. Avoid the urge to pick individual stocks. te suggest that our clients focus more on getting size Elarge, mid or small capF, style, country and sector right.
T. Don’t gamble. Derivatives are speculative instruments best suited for industry pros.
U. jinimize fees. An efficient busi- ness looks to reasonably reduce its cost of operations at all times. po do smart investors.
9. Consider the impact of taxes. heep your accountant well informed throughout the year on realized capital gains and losses from your investment accounts.
NM. Avoid margin. rse leverage to grow your business, not buy stocks and bonds.
NN. ff you sell your business, congratulations. ff you end up with a large position in the acquirers stock, evaluate hedging and monetization strategies to diversify the concentrated stock risk. oichard j. telch, Jr.
phareholder and Chief fnvestment lfficer
EmF ON5 6MP O9T6 rickwelch@academy
wealthadvisers.com