{"id":1038,"date":"2021-04-23T12:18:14","date_gmt":"2021-04-23T17:18:14","guid":{"rendered":"https:\/\/frankcjones.com\/?p=1038"},"modified":"2021-04-23T12:18:15","modified_gmt":"2021-04-23T17:18:15","slug":"investment-diversification","status":"publish","type":"post","link":"https:\/\/frankcjones.com\/investment-diversification\/","title":{"rendered":"Investment Diversification"},"content":{"rendered":"\n
The most obvious form of investment diversification that most people think about is related to their finances. You may be diversified in your stock portfolio or you may own different asset classes, like stocks and real estate. However, I have a much broader way that I approach investment diversification in my business, savings, exercise, and in my garden.<\/p>\n\n\n\n
My business, OptSus Marketing, builds and maintains WordPress websites. This includes short-term development projects, long-term maintenance agreements, and medium-term marketing retainers. Each of these services brings in revenue for the business, but the type of revenue is very different.<\/p>\n\n\n\n
Short-term development projects allow my team and I to apply our skills to a specific problem that a client is facing. Once that problem is resolved, the revenue stops. This is what causes the peaks and valleys of revenue which cause a lot of businesses to close. It's very difficult to build a business entirely on short-term project work, but these projects can be the easiest way to start developing a relationship with clients. From the client's perspective, it is much smaller risk to hire a new company to solve a specific problem than to enter a long-term agreement with an unknown business.<\/p>\n\n\n\n
Once that relationship is established and new clients begin to trust my team and I to deliver results, we discuss medium-term marketing retainers and long-term maintenance agreements. These create a foundation of recurring income which allows my business to plan for future growth and for my team to rely on recurring income to pay their bills at home.<\/p>\n\n\n\n
In addition to client work, we are also establishing a foundation of agency-owned assets. These are websites which leverage our skills to generate multiple revenue streams for the business. The combined passive and active income helps diversify the business so it is not entirely dependent on client retainers. Not only do we build and maintain WordPress websites for clients, we do this work for our own business as a way to diversity the revenue for the business.<\/p>\n\n\n\n
Since the entire company is build with location independence as a central pillar, the whole team can work from anywhere there is internet access. This allows us to move around the world freely and take the means of production with us. In the past, this form of geoarbitrage was only accessible to corporations. Today, there is a growing number of people that can live in one part of the world while deriving their income from an entirely different place on the planet.<\/p>\n\n\n\n
Moving to my personal savings diversification, I have high-risk retirement savings in a Roth IRA. This is paired with very low-risk savings account and low-cost real estate which removes monthly rent costs and provides an appreciating asset.<\/p>\n\n\n\n
Since I hope to receive outsized gains with my high-risk investments, this is done within my Roth IRA so I can avoid paying capital gains taxes on those investments. Instead, I have paid the taxes on that income before putting it into my retirement account.<\/p>\n\n\n\n
The money in my savings account does not earn enough interest to even mention. Actually, it is loosing value against inflation. However, it provides a level of security against unexpected expenses. Additionally, when the savings account reaches a sufficient sum I can convert that into other assets with better returns. For example, if the stock market suddenly crashes I can move some of the money in my savings account into the market to take advantage of that buying opportunity. Also, if my house needs a major appliance or significant repair I can dip into savings without taking on additional debt.<\/p>\n\n\n\n
Lastly, I am saving money by avoiding rent and starting to build a portfolio of real estate. Anyone that has been keeping up with my activities for a few years will remember my Lake Royale Project from 2015<\/a> and the update to that project in 2016<\/a>. In summary, I bought a camper and used it as my home so my cost of living was reduced by 80%. Today, I have sold that first camper property, bought a second camper property, and purchased another property closer so my wife can earn a graduate degree in Molecular Biology. This is a significant change from six years ago when we were paying rent, working dead-end jobs, and barely paying our bills.<\/p>\n\n\n\nExercise Investment Diversification<\/h2>\n\n\n\n