Episode 223: Building Your Investment Portfolio: Playing Offense-Defense and Leveraging Your Wealth with Denver Nowicz
Founder of WealthForLife.net, Denver Nowicz, is a seasoned fiduciary with over 20 years of experience in the financial industry. As a fiduciary, Denver is committed to always acting in the best interests of his clients and never being confined to one specific strategy.
Denver excels in collaborating with highly compensated clients to design and implement strategies aimed at scaling their wealth. With a large network of successful clients at his disposal, Denver is able to gather cutting-edge wealth building techniques and share them with the Wealth For Life community.
Denver, who had an entrepreneurial mindset from a young age, started his career in marketing before transitioning to financial services. He saw the gap in financial advice that his parents received and wanted to fix the problem. Throughout his career, Denver has always been an entrepreneur, and he has never worked for anyone else.
PLAYING OFFENSE-DEFENSE IN YOUR INVESTMENT PORTFOLIO
Many financial advisors recommend stocks to clients, regardless of their net worth, however, Denver takes a different approach in his practice -- emphasizing the importance of business interests in addition to traditional investments. He believes that wealth comes from creating businesses, and that there is a direct correlation between net worth and business interests.
Most investment portfolios are heavily focused on stocks and bonds, but some investors choose to explore alternative investments. These alternative risks pose a greater risk, but Denver believes they are important to incorporate into a diverse portfolio. Denver presents an "offense defense" framework, where he segments assets into offensive and defensive categories:
- Offensive assets are the ones that are more volatile and come with higher risk. Offensive assets may include:
- Stocks in high-growth companies or start-ups
- Crypto currencies and other digital assets
- Private equity or venture capital investments
- High-yield bonds or junk bonds
- Defensive assets are more stable and provide steady cash flow. Defensive assets may include:
- Cash and cash equivalents
- Real estate investment trusts (REITs)
- Insurance products, such as a tax-free matching program
- Utilities and infrastructure stocks
- Healthcare stocks
The idea behind having defensive assets in a portfolio is to create a solid foundation that can provide steady income, so when markets become volatile or other investments don't perform as well, the portfolio is protected.
Investors who start with a defense-first mindset are more likely to make better decisions and avoid panic when markets become volatile. With a solid foundation in place, they are in a better position to take on more investments and pursue bigger deals. This way, they can grow their business and net worth while also managing risk.
The Importance of Financial Leverage for Entrepreneurs
As an entrepreneur, your main asset is likely your business, however, it is important to diversify your portfolio and invest in other assets, such as stocks and bonds, to mitigate risk. This is often the first step recommended by financial advisors to those with excess cash flow from their business.
For many business owners, the thought of pulling money out of their business can be a daunting prospect. This is where the principle of financial leverage comes into play. Financial leverage is the use of borrowed money to increase the return on an investment. In other words: It’s using other people's money to increase your financial gain.
Denver suggests that entrepreneurs should be educated on the principles of financial leverage, and how it can be used in a safe way. Denver points out that the average investor tends to chase risk using their own money and gets upset when they lose, whereas the wealthy use large amounts of other people's money in safe assets to minimize risk.
One strategy Denver recommends is 3 to 1 Tax-free Matching. This strategy involves having a bank match a business owner's investment three to one, creating a larger asset that produces a tax-free income stream. This not only reduces the amount of capital the business owner needs to take out of the business, but it also frees up capital to be retained in the business, where it may still have the highest return on investment.
Making the Transition from Entrepreneur to Dealmaker
Being an entrepreneur and being a dealmaker are two different mentalities that not everyone is able to make the transition from one to the other. While some individuals may have a natural tendency to become a deal maker, others may find it a bit harder to adjust to the mindset. In this blog post, we’ll explore the challenges that entrepreneurs face when making the transition and what it takes to succeed as a deal maker.
The first step in making the transition from entrepreneur to deal maker is understanding that it requires a different mindset. Entrepreneurs are often focused on building their businesses from the ground up, providing good products and services, and growing their customer base. On the other hand, dealmakers are focused on acquiring and investing in businesses, real estate, or other investment opportunities.
To make the transition, it’s important to surround yourself with successful people who have made the transition themselves. This could include business owners who have made successful deals, high-net-worth individuals, and other professionals in the financial industry. By networking with these individuals, entrepreneurs can learn about the pitfalls and challenges that come with deal making, as well as get insights into what it takes to succeed.
Lastly, entrepreneurs need to be aware that deal making is a gradual process and requires patience. It’s important to have a clear strategy in place and to be willing to put in the time and effort required to make successful investments. Whether it’s acquiring another business or investing in real estate, the key to success is having a clear plan and staying focused on your goals.
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FOR MORE ON DENVER NOWICZ:
Corey Kupfer is an expert strategist, negotiator, and dealmaker. He has more than 35 years of professional deal-making and negotiating experience. Corey is a successful entrepreneur, attorney, consultant, author, and professional speaker. He is deeply passionate about deal-driven growth. He is also the creator and host of the DealQuest Podcast.
If you want to find out how deal-ready you are, take the Deal-Ready Assessment today!