Ask a typical small business owner how much of their time is dedicated to their company. They’re likely to laugh and ask you if you’re making an attempt at a joke. That’s because the average small business person invests the vast majority of their time to make their venture a success, often to the exclusion of all else. For them, there’s no such thing as “downtime.” They spend every waking moment working to advance toward the goal of building a profitable enterprise.
It’s no wonder, then, that small business owners often end up leaving their personal finances on auto-pilot. They’d rather focus on their work. It’s such a common occurrence that surveys indicate that as many as 60% of small business owners aren’t on track to save enough money to retire. A significant number have no personal financial strategy at all. It’s no surprise that the most common reason cited for this is a lack of time.
But time, as it turns out, doesn’t have to be a limiting factor. There are plenty of ways that small business owners can invest money to build a solid personal financial future. The best part is they don’t have to devote more than a few moments a day to the task. Here are three easy tactics they can use.
By far, the most reliable and fastest way for small business owners to invest is to build a diversified hands-off portfolio and to make regular contributions. A hands-off portfolio is typically comprised of investments in financial instruments like bonds, REITs, and peer-to-peer lending businesses. That’s because those types of assets are fairly reliable, and generate returns that you can automatically reinvest to grow your holdings. As far as investments go, they’re as close to a set-it-and-forget-it solution as you’re going to find. Hands-off portfolios also tend to be on the lower-risk end of the spectrum, so they’re great for long-term wealth building.
For those that like to have more flexibility or would like investments that are more dynamic, another great option is an investment account managed by a robo-advisor. It’s a computerized version of an investment account with a human broker calling the shots, but without the periodic face-to-face strategy meetings. In most cases, there’s not much to do. Make a deposit, indicate how much risk you’re willing to tolerate and let the machine do the rest. Most robo-advisors also automate things like tax-loss harvesting, which helps to offset what you owe to the IRS as a result of your activities. Plus, they allow for more easy tinkering than a hands-off portfolio. That makes them great for small business owners who like to feel they have more direct control of their money.
Although it’s a strategy that does require a little more attention, another great option for busy small business owners is social trading. An investor manages their accounts by modeling each move after another (typically professional) investor. In practice, it’s like having a human investment advisor helping you to make sound decisions. But with one big difference – you’d be patterning your account after what the advisor does with their own money rather than following generic advice.
Social trading is gaining traction among casual investors. It allows anyone to invest in even the most complex markets without having to learn every facet of what they’re doing. For example, it’s now easy to find a social trading service provided by FX brokers. Currency markets used to be all but off-limits to individual investors due to their steep learning curve. For small business owners willing to take some risks, a social trading strategy can deliver returns that blow most other investment types away.
The Bottom Line
There are ways for even the busiest small business owner to start building up an investment portfolio robust enough to see them through their golden years. Even for those who can’t (or don’t want to be) bothered with the details can find ways to let their money do most of the work for them. The real hurdle is in spreading the word about these options far and wide so that more entrepreneurs can start to take advantage of them. Then again, if you’re one of them, and you’ve taken the time to read this – mission accomplished.