If you are like many small business owners particularly those just starting out you have a large portion of your personal assets invested in your business. This may be necessary and advisable now, but as your business develops, it will become prudent to branch out into more general and diverse investments as well. At some point, this will be true even if the additional income to be gained from continued heavy investment in your company would exceed the investment return that you could get on any "outside" investment.
Presumably, one of the main reasons why you chose business ownership was to be able enjoy a certain standard of living and personal wealth. The investment planning process that we describe here is not meant to suggest that you shouldn't take advantage of business opportunities associated with plowing back money into your company to further its success. As a small business owner, you probably look to the continued success and growth of your company to generate a major part of your personal income. Because of this, your business certainly deserves your main attention and priority both in time and necessary working capital.
An investment planning process such as ours will sometimes present you with the choice between investing your business profits back into your business or into a more diversified portfolio. This planning process is aimed at doing the same thing for you that your business does: increasing your personal wealth. This process will enable you, over time, to rely less on earned income (that is, the income you derive from your efforts in your business), and more on unearned income ("outside" investments, such as stocks and bonds). The investment planning process itself doesn't in any way require you to retire or pull back from your business at any time; it does suggest that you should build the capability to do so, if you ever so desire.
A diversified investment portfolio embodies that old saw that warns you against "putting all your eggs in one basket." By having several kinds of investments, such as stocks, bonds (government and corporate), real estate, and precious metals, you greatly reduce the chance that a particular economic or legal change will devastate your investment fund.
As you read on, you may notice that in this section we'll usually address you as an "investor," rather than as a "business owner." We do this to emphasize that once you step across that threshold from investing in your business to investing in someone else's business (or land, gold, collectibles, etc.), you're pretty much in the same boat as all other potential investors. Your experience in running your own business may help you to identify good investments, but it is just as likely that it will not be of any direct help. It's our aim to provide guidance on creating your personalized investment plan, and selecting the types of investments most consistent with such a plan.