June 2006 - The Parklander Magazine

InvestmentFundamentalsBy Sal GorgeMost small business executives know that it makes sense to builda personal investment portfolio apart from the investment in theirown companies, but that’s often easier said than done. In reality,running a small business can require years of risk and self-sacrifice.Often, a business owner or executive may be returning most, orall, of his or her earnings back into the business, leaving little or noDiversify your portfoliowith a wide varietyof holdings such asmutual funds, equities,annuities, and bonds.By doing so, yourreturns will be thatmuch greater.for the SmallBusiness Ownertime for planning personal finances. So, what can you as a businessowner or executive do to help ensure your personal finances receivesome much needed attention?First, it’s important to tighten management and accountingcontrols in your business. This action can ultimately helpmake your company financially healthier and allow you moreflexibility with your business capital. In addition, if you are likemost small business owners and executives, you probably have alarge part of your personal wealth tied up in or loaned to yourbusiness. Thus, it is important to separate your personalinvestments from those of your company.How you manage your personal portfolio will depend on yourpersonal needs and objectives. However, most business ownersand executives share two elements of portfolio managementin common: liquidity and diversification. A higher levelof liquidity can help provide greater flexibility and mayenable you to take advantage of new business opportunitiesmore readily. Diversification is equally important to help manageyour portfolio’s risk. By varying your investments, you maybe able to minimize the effects a decline in a single holding mayhave on your overall portfolio. Keep in mind that, althoughit can help reduce risk, diversification cannot eliminate the riskof investment loss.Taking ControlEventually, one of your primary goals (besides runningyour business) should be to take as much controlof your personal finances as possible. The following stepscan help you develop a more complete savingsand investment strategy:• Separate your personal finances from your businessfinances.• Save a fixed amount every week or month.• Diversify your portfolio with a wide variety of holdingssuch as mutual funds, equities, annuities, and bonds.• Protect your family and your business with properinsurance coverage (life and disability).• Maintain adequate cash reserves.• Stay current.Long-term business planning and budgeting are important to theultimate success of your company. At the same time, the creation ofa long-term, personal financial plan and investment strategy isequally critical for the financial success of you and your family.Sal Gorge is a financial consultant who advises United States Congressmen,Professional Athletes, Fortune 500 CEOs and hundreds of businessmenand families.106the PARKLANDER