Top Financial Best Practices for Small Portfolio Owners

Having an investment portfolio of any size is certainly considered a win. However, you must be doing everything right to protect your investment portfolio so that it can continue to grow and hopefully become a portfolio that becomes something bigger.

With that being said, there are plenty of financial best practices worth embracing for the benefit of your business. Here are some of the top tips for navigating a small portfolio.

Budget and tracking everything

This is quite possibly one of the most important parts of running a portfolio of any size. If your numbers are wrong, then that can disrupt your portfolio in terms of its profit margins and the decisions you make based on what you think you’re getting in terms of income.

 

Creating a detailed budget and making sure to meticulously tracking any income and expenses are essential so that you can spot any potential problems early on.

 

By budgeting and tracking everything, you keep a closer eye on what’s coming in and going out. While you might not have a huge amount of investments, the ones that you do need to be managed carefully.

Separate your accounts

A good way of keeping on top of your investment financials is to separate your accounts. This is important because it enables you to keep your business finances and your personal finances separate.

 

It’s also incredibly beneficial if and when you encounter any situations where you might be experiencing financial fallout from a buisness investments.

 

Keeping both finances distinct is what will provide clarity and be helpful for easier tax prep at the same time.

 

Try to keep all of your accounts separate, and ideally, having a bank account for each investment pot you have is likely the best way of keeping on top of everything financially.

Make use of accounting software

Accounting software is incredibly beneficial when it comes to keeping track of your finances. Tools like QuickBooks, for example, have long been an effective way to streamline your financial management and reporting. The use of property management accounting software can be helpful when dealing with multiple rentals.

 

For most people dealing with small investment portfolios, having any knowledge of how to conduct their accounts may feel like a mystery. That’s why it’s incredibly important to make use of any accounting software that you can get your hands on. 

 

Thankfully, a lot of the accounting software available nowadays is easy enough to understand and doesn’t require a great deal of knowledge to get to grips with. There are plenty of platforms beyond just QuickBooks, too, so it’s worth exploring the option and taking advantage of any free trials to see which one works best for you. 

Understand your statements

Speaking of accounts, you should be aware of what your cash flow looks like, your balance sheet, as well as your P&L. These are all important to be able to make informed decisions that influence the success of any investments that you have ownership of.

 

Again, it’s not something that everyone will be fully informed about, so it’s important that you’re doing your best to understand how it all works.

 

If you don’t really understand any of it, then there are plenty of resources online that you can take advantage of. Otherwise, if you really can’t get to grips with it, then outsourcing these needs might be the best next step to take.

Regular reviews

Regular reviews of your finances are integral to helping adjust your strategy. This is something you can allocate weekly to make sure you’re regularly checking in with what your finances look like and any changes that might be worth making in the interim.

Build an emergency fund

You never know what’s around the corner when it comes to small portfolio owners. Having cash reserves is definitely worthwhile just in case any investments are having a tough month or two. Having those emergency reserves, it avoids having to sell investments at a loss during downturns.

 

Having an emergency fund in general is helpful to have, so it’s something you can incorporate into your daily lifestyle, too.

Manage debt smartly

Managing debt smartly is certainly important because it can help with growth. Many people look at loans and have concerns about using them due to the risks they bring with them. However, using loans for growth is definitely a smart way of making use of money that’s not yours but may eventually become yours if the investment is a successful one.

Diversify income

Diversifying your income is certainly a great way to grow your business. That’s why it’s good to explore new channels, whether it be e-commerce or offering different services as part of a specific investment.

 

Boosting revenue is something that you should always be actively doing to help build on your financial success.

Invest in yourself

Learning new skills is always important when it comes to increased earning potential.

 

With that being said, it’s worth allocating some of your profits to investing in yourself so that you can learn more and grow from the investments you build upon now and in the future.

Plan for retirement

It’s a great idea to try to plan for your retirement and to start saving early, where you can. When you have a small investment portfolio or any portfolio of any kind, retirement is something that you should factor in when you’re planning to sell your investments or use them as an income buffer during your retirement years.

 

Explore what pension schemes are available and what the best ones are for your needs and circumstances. 

Seek expert advice

Finally, if you’re not sure about how to handle certain investments or where to go next, it’s definitely worth getting in touch with an expert who’ll know more about investments and everything that comes with them. From complex areas like taxes, to investments, and pensions.

 

All of the above are great tips that will hopefully help build your small portfolio from strength to strength this year.