Your Investment Portfolio as your Small Business


Written by: Martin X. Shields CFP®, AIF®

To help drive the correct behavior for investors it can be helpful to frame the portfolio decisions from different perspectives.  Commonly, individuals view their investment portfolio only in the context of the stock market, the economy, and the political environment.  This perspective often causes individuals to make bad decisions based on emotion, news headlines and gut instincts that tend to be wrong.  To help provide a paradigm change in how to view their investments it can be beneficial to look at your investment portfolio as a small business where you are the owner of the business, and you are hiring an investment manager to run the business.  There can be four primary benefits that arise when investors start to take this perspective.

  1. Most small business owners are not concerned, nor can they actually check the value of the business on a daily, weekly or even monthly basis. This allows them to be focused on long-term goals and not get caught up in the daily headlines.  Having this same perspective with your investment portfolio allows you to avoid getting caught up in short term moves in the market and focus more on long term performance of asset classes.


  1. If your investment portfolio (i.e., small business) is creating taxable income through realized gains or bond and dividend income, then have your small business pay for the taxes from its cash flow rather than worrying about finding the cash outside the business. This helps ease the concern when taxes are owed on the account. As we always remind our clients, you want to minimize your tax liability on your small business, but taxes are a functions income and gains which is a good thing.


  1. Small business owners will look at the economy and make adjustments to their strategy, but the most successful ones will take precautions before the storm to prepare for economic (aka selling stocks when they are high) and become more aggressive with their strategy when things look bleak to prepare for any economic upturn (aka buying stocks when they are low).


  1. One of the most important lessons to learn from small business owners is that even when their business is struggling in a weak economy, they don’t close their business, sell their inventory, and let their people go unless they plan on closing their business. This is important for all investors to remember that trying to time the markets, sell their positions and going to cash is never a good idea unless they plan on staying in cash for the future.



Finding success in life and finance can sometimes be a matter of perspective and taking the approach that your investment portfolio is similar to a small business and should be treated with the same level of care and concern. Decision should follow a well thought out approach and not done based on the emotion of fear or greed. For further insights into the effects of human emotion on financial decision-making, please click here.

If you have any questions regarding your small business (aka investment portfolio) and how it is being managed, please reach out to us for some insight and guidance.

Bouchey Financial Group has offices in Saratoga Springs and Historic Downtown Troy, NY as well as Boston, MA and Jupiter, FL.

Posted in