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It can happen to you...

 


April 2012

     A friend of mine recently told me a story about his past, saying things were going fantastic with his career. He had five franchises and revenues were strong. Unfortunately, hard times came about and the company’s capital started falling short. So, what did he do? The same thing most business owners would do; he put his personal savings back into the company. This was a good fix, for a little while, but not for long. His business continued to suffer, not for any reason other than a bad economy, which many of us can relate to. Eventually, he had put all of his personal savings into his company and when he was unable to receive funding from other sources, the business went under. He did not just lose his business, but his livelihood. He wasn’t able to support his family and his house went into foreclosure.

     Diversification is not just important when it comes to investing. Diversification is key when it comes to your money in general. As much as you know your own business and believe in the future of your company, it is crucial to protect yourself and defend against the unexpected, through diversification. The last thing anyone wants is to have their lifestyle go backwards by being too leveraged in any one particular area; including your own business, should that business take a significant setback. Look at the real estate industry for example, some people went from cloud nine to the basement fast!

     There are several ways a business owner could utilize their excess personal cash, rather than pouring the money back into their business. One way to diversify your personal cash flow, as your business goes through its normal ups and downs, is with corporate bonds. Corporate bonds pay consistent income because issuers are obligated to pay interest payments;* as opposed to stocks, which may or may not pay a dividend, based on the company’s discretion. Often, when times are tough and money is tight, companies may reduce their dividend payments, or even drop the dividend altogether.

     A small business owner may cushion the down cycles of their business with cash flow from corporate bonds. Take suitable precautions for your money today, so that it will be there to support you tomorrow.

Disclosure: Securities offered through vFinance Investments, Inc., Member FINRA/SIPC. The Child Group Wealth Management advisors are registered with National Asset Management, Inc., a SEC Registered Investment Advisor and affiliate of vFinance Investments, Inc. Accounts are carried by National Financial Services LLC, Member NYSE/SIPC, a Fidelity Investments company. National Asset Management and vFinance Investments are not affiliated with the Child Group Wealth Management.

Disclaimer: There are risks involved with investing, including loss of principal. Past performance does not guarantee future results. By investing in bonds you may be subjected to price volatility based on fluctuations in issuer and credit quality. When investing in bonds, you are subject, but not limited to, the interest rate, inflation and credit risks associated with the bonds. Bonds may be worth less than original cost upon redemption or maturity. ** Fixed Income investments may limit a client’s risk exposure by receiving consistent cash flow on their investment depending on the terms and rating of the investment, no matter what the market value of the bond is at that time. So, even thru volatile times, as we have seen these past few years, while the principal value of bonds will fluctuate with the markets, most bond investments are locked in at a fixed interest rate of return.

* Interest payments are determined by the interest paying ability of the underlying guarantor. Principal for fixed income products are generally paid upon maturity date unless called prior to maturity by the underlying guarantor. Investments in Fixed Income products may lose principal value if sold prior to maturity. ** Please discuss your specific investment objectives, time horizon and risk tolerance with your investment professional prior to investing.

National Asset Management, Inc. ("NAM") is a registered investment advisor with the Securities and Exchange Commission. NAM provides fundamental investment management services to investors. The views expressed contain certain forward looking statements. NAM believes these forward looking statements to be reasonable, although they are forecasts and actual results may be meaningfully different. Actual events may cause adjustments in portfolio management strategies from those currently expected to be employed. This material represents an assessment of the market at a particular time and is not a guarantee of future results. This information should not be relied upon by the reader as research or investment advice regarding any security in particular. No representation is being made that any investor will or is likely to achieve profits or losses.

Diversification: Diversification does not guarantee against loss. It is a method used to help manage investment risk.

(c) Child Group Wealth Management 2012






 

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