One of the reasons I really get into stock investing is that I like to live vicariously through my investments. Say what? Yes, I live vicariously through my stock holdings because I imagine that I’m the owner of the company — hard at work building it. I become an intimate stakeholder of the business by owning its stock; as opposed to investing via mutual funds. But how many investors out there feel that their miniscule ownership can actually affect changes like Warren Buffett or Carl Icahn?

Nevertheless, I’ve trained myself to evaluate businesses with an owner-like mentality as part of my investing habits. Deep down inside, I like to think entrepreneurially and want to run my own business. I am currently working on my own projects. Investing also helps me learn about what great companies are doing to drive their business and it’s less costly to learn from other people’s mistakes than it is to learn from your own. But for a lot of people out there, they’re simply content with being an employee, and there’s nothing wrong with that!

Career Allocation?
In the investing world, financial services companies advocate asset allocation. The basic premise of asset allocation is that there are 3 basic asset classes:

  1. Short-term investments
  2. Bonds / Debentures
  3. Equities

Investors always hear the gospel that they must to distribute their portfolio among these 3 classes. As you move from short-term investments to equities, the risk factor steps up but with more risk comes an increase in potential rewards as well.

But what if we thought about our careers with the same risk vs. rewards analysis? Would it look something like this?

  1. Employee
  2. Investor
  3. Entrepreneur

Employee
For the most part, being the employee is being Steady Eddy; except when you encounter corporate downsizing. This unknown factor means that there isn’t a perfect analogy on our list for short-term investments. However, provided that those incidents don’t happen to you, the role of the employee will serve adequately as the guaranteed income stream needed to fund your lifestyle.

And don’t delude yourself into thinking that you’re not making an investment as an employee! How else do you explain that paper degree hanging as decoration? What about those who feel that they need to persue a PhD or an MBA in order to advance in their career? You often need to invest in yourself should you have ambitions for that higher pay-grade.

Investor
I was tempted to make the Investor related to short-term investments since retirees’ can remain an investor and use that income stream. However, more and more people are working past retirement. As well, that income stream is really in jeapordy because of the lack of personal finance knowledge in the majority of the population. In fact, the general public often perceives more risks associated with being an investor. (An argument to be written in a future post!)

The investor role can also serve as the bridge between employee and entrepreneur. Some companies feel that empowering employees as owners via share ownership will help them be more aligned with the board of directors. Why they choose to do so with stock options rather than stock grants is another matter of debate.

Entrepreneur
I nod my heads to entrepreneurs everywhere. It’s not easy to forge your own trail. Many out there can attest to the countless sleepless nights, sweat and toil that went into building their business. Even fewer are able to form a business empire. But with all the risks can come rewards of the highest caliber. Indeed, only a handful on the Forbes list of billionaires made their fortune through investing. The vast majority of billionaires broke out because of their business ventures, and use investing as a means to diversify and maintain their riches.

For every entrepreneur that succeeds, hundereds have seen their ventures fail, ending in bankruptcies or sale of their operations. With these considerations, entreprenurs certainly deserve to be ranked alongside equities as the riskiest career choice that holds the keys to potential riches.

As well, I’d like to lump anybody who’s pursuing their passion in this category. Let’s say you’re an avid photographer, and you love travelling in pursuit of snapping shots everywhere. Well, you might not be monetarily compensated, but your soul thanks you for that! There is a benefit, and a potential business should you ever discover a way to combine your career with your passion. Do bloggers count?

Is There An Allocation Model?
I don’t think any individual who’s graduated from high school or college in the past ten years has not heard the rumblings that job security is a thing of the past; that staying with a company for ten and twenty years is no longer the way to go. Just look at these 2 recent Dilbert comic strips.

Dilbert's Job Hopper Dilbert's Job Hopper Quits

Besides the fact that pensions are going the way of the dinosaur, there is now a better reason for people to start thinking about other streams of income. Ramit Sethi (a personal finance blogger that I enjoy reading) reminded young people that “now” is the time for them to make better use of their time for potential side projects and potential entrepreneurial aspirations. In that regard, career allocation is similar to the promoted asset allocation principles where time is on the side for those people who wish to take on more risk for the potential rewards.

What Is Your Allocation?
I’ll be the first to admit that I don’t believe these characterizations are right for everyone. Whether you are young or old, your career allocation should have a bit of investor in them. That’s why you’re reading this post right? As for making that high-risk leap to being an entreprenur, you have to find that passion that will allow you to triumph over adversity. I’m curious to hear from other’s about what the allocation is. If I were to give a simple approximation of my allocation, it could be:

75% employee
15% investor
10% entrepreneur

I definitely intend to increase that investor/entrepreneur portion over time. Now it’s your turn!

Comments (8)

I agree with you- that each level, or career allocation, serves a purpose. I also agree that order and purpose may vary for individuals. For me it is entrepreneur to investor. My business makes money for me to invest with, which in turn allows me to do what I love in business and put money back into investing- a little cycle.
A job or business, even built part time on the side to start, in my mind is a way to fund your investing- because that is what is really going to give you the freedom and resources to do what you want.
Eventually, I should be an employee of my own company, as welll as business owner, doing what I love, making money as an investor as well!
My two cents!

prlinkbiz, thanks for sharing your perspective. You brought up a good point about “order” and you stated that your business funds your investments. Excellent point!

Chris, I’ll have to check out Millionaire Maker. When I first got interested in personal finance, it was from Kiyosaki that woke me up, it was also a book by Spencer Johnson – Who moved my cheese? that got me thinking about change, downsizing and what lies beyond being an employee.

I’ve since moved away from Kiyosaki (many different reasons) as there are many perspectives out there and ultimately, we can’t be stuck on reading, we gotta eventually start on “doing”. =)

Cheers!

That’s also an excellent book! I believe America’s new consulting culture will help feed the engine of future entreprenuership.

Unlike the past where a person would stay at a few companies their entire career, now 12-18 months is the new minimum acceptable length — shorter than some consulting contracts. By treating their resume as their career, and not their company, employees can remain flexible and stay employable.

Keeping people thinking about their own skills and shifting their frame of mind from external companies to internal skills I think helps feed the entreprenurial desires that I feel come so naturally to Americans.

While some complain about the structural shift away from manufacturing, this new consulting society is really better for everyone. In order to attract highly skilled workers, companies will have to treat their employees well — eliminating the costs of unions to the society.

Unfortunately though, it seems many short-sighted employers want to avoid training staff that may not stick around, causing us to pick up some of that burden.

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