Bet it all on the business?
How to Actually Build Wealth as The Boss
Let’s talk about Tony (real story, different name). He and his co-founder built a game-changing product that solved a problem in the advertising industry nobody else had figured out, poured six years of their lives into it, raised over
$1 Million, and took no salary—reinvesting everything while living off savings. Unfortunately, focusing on product over sales meant profitability never came. After a few failed acquisition deals, reality hit: bills were due, and the business had to shut down. Tony lost his company and his financial safety net. Ouch.
Tony’s story isn’t unique. Most small business owners know they should invest their money smartly, but figuring out how—what accounts to open, how much to invest, what risk level to take, and the order of operations for accounts—gets shoved to the back burner. Why? Because it feels overwhelming and less urgent than, say, replying to customer emails or making payroll. But here’s the thing: ignoring it doesn’t just leave your finances vulnerable—it sets you up to fail when life happens and hinders potential growth even when things are sunny.
Let’s bust the myth right now that you should “bet it all on your business” if you really believe in it. This approach doesn’t just concentrate your risk—it also locks you into a mindset that could stifle growth. If your business is your sole safety net, you’re more likely to avoid the risks that could help it grow, like testing new markets or experimenting with your pricing model.
So how much risk should you take in your personal portfolio?
Your risk tolerance is influenced by factors like your age, financial goals, time horizon (how soon you’ll use the money), and current financial picture. But here’s the kicker for business owners: your business itself is already a high-risk investment. And that means your personal portfolio should work with that reality, not against it. For starters:
Diversify Away from Your Industry
Your business already ties your financial future to your industry’s performance. So, let’s say you own an engineering firm—it’s probably not the time to load up on construction stocks. Use your portfolio to diversify into industries and assets unrelated to your business.
Balance Growth with Stability
Since your business is inherently volatile, your personal investments should offset that risk. This means leaning more into stable assets like bonds, cash reserves, or broad-market index funds than you would if you didn’t have your business.
Meet Jessica: A Balanced Approach
Jessica, 40, owns an architecture firm that employs 30 people. Her business is tied to economic cycles, so her personal portfolio is designed to balance growth with risk reduction:
| Account Type | Allocation (% of Portfolio) | Account Risk Level |
|---|---|---|
| Emergency Fund (HYSA) | 5% | Low - Cash/liquidity |
| Jessica’s Business | 30% | High |
| 401(k) | 30% | Medium - 70% stocks / 30% bonds |
| IRA | 10% | Medium - 70% stocks / 30% bonds |
| HSA | 5% | High - 80% stocks / 20% bonds |
| Taxable Investment Acct | 15% | Diversified stocks (U.S., International, REITs) |
| Real Estate | 5% | Rental property or REITs |
This setup allows Jessica to sleep at night, knowing her financial future isn’t entirely tied to her firm’s performance.
How can you figure out the right risk level?
01. Assess Your Financial Stability: While businesses should generally save ~10% of monthly revenue for emergencies and build a 3-6 month operational reserve, similar advice for personal emergency savings is often too conservative. We'll cover how much to save and where to keep it (hint: not a traditional savings account) in a future post. For now, focus on real potential emergencies, how much you might need, whether it would be needed all at once, and other safety nets available to you to avoid high-interest debt.
Want to know how much risk to select in your long and medium term investment accounts? Check out our Free Risk Profile Calculator for Business Owners
02. Define Your Goals in the Short, Medium and Long Term: Are you saving to achieve financial freedom? A home? The closer your goal, the less risk you want to take. The farther you are from your goal the more risk you can afford to take—because you have time to recover from downturns.
03. Understand Your Comfort Level: If the idea of market volatility gives you sleepless nights, you might want to go for a more conservative portfolio — for now — with the goal of learning more about risk diversification since studies show those who have greater financial knowledge tend to take more risk.
Bottom Line
As a business owner, your personal investments are your financial safety net. Think of them as a way to hedge against the risks you take every day in your business. Diversify, prioritize stability, and don’t procrastinate. As your business grows and becomes de-risked, you can re-assess. Your future self will thank you.
Before investing, consider the funds' investment objectives, risks, charges, and expenses.
Portfolio performance includes average monthly fees of .9% (90 basis points). Past performance is not an indicator for future performance- investing involves risk of loss and risk of principal.