How Entrepreneurs Invest Wisely
The definition of an entrepreneur tends to revolve around an individual who is able to think outside of the box and generate an independent stream of income in order to promote his or her product or service. More often than not, this will involve a certain amount of investing.
It is therefore perfectly logical to examine some of the primary principles which define success and how these strategies can be applied towards an average trading portfolio. Let us look at five methodologies which have been embraced by the winners over the years.
1. Portfolios with Limited Access
One of the first techniques shared by many entrepreneurs is to set aside what can be referred to as a “hands-off” portfolio. This will help to accrue wealth over time and the investor will not be tempted by the idea of accessing these funds before a predetermined date. Such portfolios tend to be comprised of long-term holdings which are associated with stiff early withdrawal penalties.
2. Asset Protection
Whether loved or hated, the fact of the matter is that Donald Trump has grown wealthy as a result of his personal fiscal policies. One approach often associated with his strategies is known as asset protection. This is simply a means of placing valuable assets into positions that cannot be accessed by creditors in the event that a business venture fails. Certain types of limited trust funds and transferring some of these assets across to family members are two examples of how this can be accomplished.
3. Conservative Outside Diversification
It can be a dangerous prospect to invest in the same sectors as a business venture. If this industry experiences bearish times, the portfolio as well as the venture itself will likely suffer. This is once again when the power of diversification should be underscored.
By investing into disparate industries and sectors, the chances of taking a massive loss due to a downturn within a specific area of the economy are dramatically reduced. It is also important to keep in mind that a diverse portfolio is able to weather fluctuating markets with much greater stability.
4. Building Cash Value
It is a foregone conclusion that the majority of investments are associated with a certain level of risk. However, the same cannot be said for life insurance (and life assurance) policies. The entire purpose of a whole life plan is to generate predictable wealth and liquidity over time.
These assets can then be used as collateral or as a quick cash injection in the event that extra funding is needed sometime in the future. It is still very important to choose a whole life policy that coincides with the requirements of the business in question.
5. Fixed Income Options
Although there is nothing inherently wrong with equity-based portfolios, many seasoned entrepreneurs prefer holdings which can provide a predictable level of income in addition to market performance alone. This is often the reason that blue-chip holdings which are associated with dividends are preferred over more liquid (and more volatile) positions. Treasuries and bonds are two other examples of similarly predictable wealth-accruing assets.
Ultimately, investing wisely is only a portion of the bigger picture. It is the responsibility of the entrepreneur to make sound business decisions along the way. Magnates such as Bill Gates and Warren Buffett are known for their savvy approaches both on and off of the proverbial “trading floor”. These five suggestions will help any budding business professional adopt the best practices from the very beginning. As a result, achieving one’s dream has just become much easier than initially anticipated.