On Jim Cramer’s Mad Money there is a regular segment called “Am I Diversified?”. As a small business owner often the answer is a very clear NO! Most owners have a majority of their wealth invested in their business. While this strategy might be effective in the beginning of your career … it is important to set a little bit aside every month. Invest in companies in a different industry or sector from the way you make a living. Here are five tips for becoming more diversified:
- Find investments that are counter to the trends that you experience in your business. (chose investments that will be more likely to offset downturns in your sector)
- Spend some time to become knowledgeable about the companies in which you invest. (listen to the conference calls and watch the stocks, you’ll learn things to help your investments and maybe even your company)
- Minimize your downside risk by choosing stocks that pay solid dividends. (every month or quarter that you receive cash payment you’re taking money off the table and reducing your risk)
- Make your investments in non-retirement accounts (if you ever need the funds for your business you don’t want to have to pay additional taxes or fees to tap those assets)
- Start small and grow over time (your business is important but if you pull a little bit out at a time you’ll learn a great habit and you’ll never miss it)
I know your business is important, but don’t forget to spread out your assets (even just a little bit). Not only will it help maximize your wealth but it will help you sleep better at night since you know that everything isn’t dependent on your business.
