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Running a business in the UK means your income can change month to month. One strong year can be followed by a worrying slump. That means building a stable, diversified investment portfolio is especially important.
Diversification means spreading your money across different types of assets so that if one area performs poorly, others can help to offset the loss. For entrepreneurs, this also means thinking about wealth beyond your business itself. Many business owners have most of their net worth tied up in the company they’ve built. That’s a significant concentration of risk. Read ahead to find out how you can start building a portfolio that works alongside your business, not just because of it.
Start with Your Financial Goals
Before you invest anything, get clear on what you’re trying to achieve. Are you building wealth for retirement? Protecting assets to pass on to your family? Creating income outside of the business? Your goals will shape your entire strategy.
You’ll also want to think about your time horizon and your attitude to risk. If you’re in your 30s and won’t need the money for 20 years, you can generally afford to take on more volatility. If you’re approaching retirement, you’ll likely want more stability.
Spread Across Asset Classes
A well-diversified portfolio will typically include a mix of the following:
Equities (shares) – ownership in companies, which offer growth potential but can be volatile
Bonds (fixed income) – loans to governments or companies that pay regular interest, generally lower risk than equities
Property – either direct investment or through real estate investment trusts (REITs)
Cash and cash equivalents – useful for short… Read More
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