facebook twitter instagram linkedin google youtube vimeo tumblr yelp rss email podcast phone blog search brokercheck brokercheck Play Pause
Ep #039: Unlocking the Art of Disciplined Investing for Small Business Owners Thumbnail

Ep #039: Unlocking the Art of Disciplined Investing for Small Business Owners

As a business owner and entrepreneur, a disciplined approach to investing is absolutely essential. It's not just about your investment portfolio or 401k. It extends to every investment opportunity, including private equity and real estate.

In this episode, we're going to unveil the secrets of disciplined investing, covering key topics such as:

  • Decoding the significance of a target allocation and how it empowers you to make informed investment decisions
  • Assessing the role of target allocation in determining your participation in new deals
  • Exploring the components that constitute a robust target allocation strategy
  • Discovering how streamlined external investments effectively manage risk and secure your business



If you like the Business Exit Success podcast …

Never miss an episode by subscribing via Apple Podcasts, Spotify, Stitcher, Google Podcasts, Amazon Music or  RSS!


Subscribe to the Business Exit Success Newsletter.

As a thank you, you'll receive a copy of The Freedom Point: A Financial Planning Guide for Business Owners.

👉 Click here to subscribe and grab your free guide.


"One of the most important things to have in place as a business owner and entrepreneur is a disciplined approach to Investing. And not just with your investment portfolio or 401k, this is with investing in anything like private equity or real estate. Having a disciplined approach in my experience will help you know what your target allocation should be, that’s in line with your risk tolerance and goals. Having a target allocation will help you make better investment decisions when new and exciting random opportunities come up and you are able to avoid making unnecessary investments."

Why should business owners have a target allocation?

"And here’s what I mean by that. Let’s say you’re talking with a buddy of yours and they say have you seen what Bitcoin is doing, maybe we should consider getting some of that, or Did you see this startup, these investment properties, they’re gonna be worth millions in a few years. And because the opportunity is exciting and attractive you may go ahead and buy into these things. What happens is you end up taking unnecessary risks with your wealth because you become overweight in that one category even though it may be exciting. Let’s say someone approaches you with a private equity deal, and you already have 10% of your wealth allocation in private equity. Well, now you know to turn down the deal because you don’t want to be overweighted in that area. But you wouldn’t know to turn down the deal if you didn’t have a target allocation set up for yourself."

"And that starts with understanding where is your money right now and how is it allocated. If you make a list of all your assets, most of your net worth will be in your business and maybe you have a 401k, SEP IRA, and some real estate. Once you understand where your money is today, then you create the target allocation."

What does a target allocation consist of

"Now let’s talk about what’s in a target allocation. This will include U.S. stocks, Foreign Stocks, bonds, cash, and sometimes alternative investments like private equity, private real estate, hedge funds, crypto etc. Now my preference as a Certified Financial Planner and someone who works with business owners, I encourage keeping the allocation simple rather than complex.  For two reasons:"

Business owners should keep outside investments simple to help manage risk

"First even though crypto and hedge funds are exciting, they add additional risk to your wealth allocation that may not make sense. In some cases, it can make sense and represent a very small percentage of your overall wealth allocation. Remember, your private business that you are trying to grow is already super high risk. Staying diversified outside of your business and managing risk effectively will allow you to stay wealthy over a long period of time. Especially when you go through periods of fluctuations in your business, having assets that are outside and separate from your company can help when there are liquidity needs."

Make investment decisions based on probability, not possibility

"Second reason to keep your outside money invested in a simple manner is based on history and investing in probabilities, not possibilities. Here’s an example, in a study done by JP Morgan if you took a 50% stock and 50% bond portfolio invested from 1950 – 2022 your average annual return would be 8.7%. Now there is no guarantee that it will happen again over the next 20-30 years, but based on prior market cycles over history, there is a high probability that the portfolio will be higher than it is today over time."

"Now investing based on possibilities is where you can make mistakes or miss out on opportunities. An example, I had clients who wanted to stay completely in cash because they were 100% sure the market was going to crash and not come back for another 10 years. I heard this because of elections taking place, the supply chain issues because of COVID, inflation sky rocketing, insert whatever you want in there, I’ve heard it. And when you wait and try to time the market like this because you think something possibly could happen, you miss out on opportunities. So invest based on probability, not possibilities."

"Keep in mind, building out your allocation can take time, But by taking a hard look at where you are today and comparing that to where you want to be in your target allocation, you can create a roadmap to get you there over time. Remember business owners get wealthy by being concentrated in their business, but stay wealthy by being diversified outside of the business."