An entrepreneur who creates, manages, and grows a company should be able to do the same with an investment portfolio, no? After all, success is transferable, isn’t it? The very qualities that make a great entrepreneur should also make for a great money manager. Right?
I don’t think so, and here’s why.
Being an ace attorney doesn’t qualify you to perform surgery. World-class architects rarely have accounting businesses on the side. And no one wants to visit a dentist whose education and experience are chiefly in musical performance. We turn to skilled, specialized professionals in all matters of importance, and I encourage the same for entrepreneurs hoping to build and protect their portfolios.
Different task. Different skills.
An entrepreneurial mind is a beautiful thing that can create remarkable business value and wealth. Entrepreneurs see opportunity where others see obstacles. They welcome risk. They’re ready to experiment, innovate, and improvise. They absorb, decide, and act.
While these qualities are essential for building a breakthrough business, they may not be ideal for managing a high value investment portfolio. In investing, not taking action when market, economic and political conditions change requires patience and restraint that many entrepreneurs find unnatural or unsatisfying.
Fortunately, another key characteristic of successful entrepreneurs is “knowing what you don’t know.” The perspective to recognize the need for specialized skills and experience — and the ability to identify experts who can deliver that insight — allow entrepreneurs to transform big ideas into dramatic results.
I recommend the same approach for investing — supplement your own skills with those of experts and trusted advisors. Rely on the experience of a registered investment advisor to provide key investment and wealth management guidance, as well as to marshal patience and restraint when markets misbehave. Focus your energies not on managing your portfolio, but on finding an investment advisor who understands your goals and pursues a strategy that makes sense to you and for you.
It’s not a hobby
Many entrepreneurs find themselves wondering “What next?” after selling or ceding control of their businesses. Managing your portfolio can be an interesting diversion, but with your family’s financial security on the line, it’s a poor choice of a hobby. Teaching, the next company, or philanthropy might be better choices. If you want to make a hobby of investing, it’s best to do so with a small discretionary account, money you’re prepared to lose if your investments don’t pan out (while the rest of your assets are professionally managed).
As a middle ground, consider this option: Appoint yourself chairman of the board of “Me, Inc.” Hire a “chief of staff” financial advisor who reports to you, and is responsible for keeping and growing your investment capital. Treat your money like a business, and hold it accountable. But don’t try to run parts of the business where you’re not fully qualified.
Ultimately entrepreneurial success and investment success are two very different things. As this Entrepreneur.com article asks: “Just because you can manage your own portfolio, does it mean you should?” I think the answer is no.
Each of my 25+ years in the investment industry has reinforced one key idea it's impossible to predict the future, but essential to prepare for it.
This blog discusses developments in the economy, politics, and the markets, all from the perspective of what matters most to individual investors. Don't look for wild predictions, urgent stock picks, or hot deals. Instead, expect clear, practical ideas on investing and wealth preservation that help investors make responsible financial plans.