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7 Portfolio Management Tips for Small Business Owners

Posted by Tom Hallissey on Nov 28, 2018 10:00:00 AM

portfolio management

If you are a small business owner interested in investing, you likely have many questions. From initial research to practicing caution, you will benefit from learning these seven basic tips that will help you with portfolio management.

How to do Portfolio Management the Right Way

1)      Educate yourself

Before you start buying stocks or bonds, you should first improve your financial literacy. A solid knowledge of basic financial concepts is helpful throughout the investing process.

Learn the definitions of basic investing terms, including:

  • Bear
  • Bull
  • Blue chip
  • Book value
  • Dividend
  • Securities
  • Yield

2)      Strike a Balance between Investing and Business Investment

You have invested a lot of time, effort and money into your business already. A new portfolio should add to your success rather than take resources away from it. Don’t let investment losses cut into your financial reserves.

portfolio management 2

3)      Do your Due Diligence

If you are going to invest, it’s important to thoroughly research your options first, including:

  • Developing a solid understanding of investment vehicles
  • Researching every possible addition to your portfolio
  • Understanding the ups and downs of the market

Even if your small business cash flow is increasing steadily, you can’t afford to make poor investment choices.

4)      Diversify your Investments

As the old saying goes, never put all your eggs in one basket.

Since investment vehicles tend to fluctuate, you can reduce your risk with a diverse portfolio management strategy. By allocating your money into different types of investments, you won’t be putting all your capital at risk.

5)      Keep it Simple

It’s easy to get carried away with investing. One stock purchase can lead to another and another.

Although it’s important to diversify, you should also make managing a portfolio as simple as possible. Otherwise, it can become overwhelming and unmanageable, distracting you from business activities.

portfolio management 3

6)      Don’t Risk your Business in the Market

Although this tip may seem obvious, it could be the most important one on our list.

Whether you are a novice or an experienced investor, you should never invest recklessly. Regardless of how well the economy is doing, the market can rise and fall without notice.

If you track your investments like you track your budget, you can help limit your financial risk.

7)      Hire an Accountant

It can be difficult for a small business owner to do their own accounting. Add an investment portfolio to the mix, and it becomes even more complex.

By hiring a tax professional, you can avoid making mistakes that may cost you money or even cause compliance issues. If you have any other questions about personal financial planning, contact a local tax professional.

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