Asset Allocation

Asset allocation is among the most important considerations for those who have sold their businesses. The optimal balance can only be reached when consideration is given to long- term legacy goals and portfolio objectives are discussed. Among the primary considerations:

Dollar cost average: Taking a systematic approach to deploying your assets is key. Dollar cost averaging reduces the risk of putting your money to work in assets that are nearing a correction.

Diversification of proceeds: Diversification has been proven to be a winning long-term strategy. That said, diversification’s merits extend well beyond picking different securities for your portfolio. Diversification strategies include active vs. passive strategies, private vs. public securities, domestic vs. international assets, stocks vs. bonds, etc.

Stock compensation: If you have entered a deal where stock is the primary consideration given for your company, proceed with caution. There are significant risks with owning shares of a company where you have limited control and most of your wealth is tied up. There are many hedging strategies to be considered.

Cash flow: Special consideration must be given to cash flow needed in the immediate future. It may sound silly, given that you are now more liquid than you have ever been, but post-sale business owners are often surprised when they invest injudiciously that there is not enough cash left over to meet their needs.

Private Investments: You have sold your business and now you have access to the exclusive world of private equity and hedge funds. While these can be valuable tools, proceed with caution. Not all funds are created equally. Additionally, the internet is littered with stories about private investors getting defrauded by these types of investments. Even if intentions are good, these investments can be black holes.