For advisers, the challenge is to come up with something better in terms of both risk and reward than what an entrepreneur can do himself. Business owners also like investing in companies they know personally. Steven Smith, for example, owns stock in chain drugstores and other retailers that this company does business with. An entrepreneur who sells to the microchip industry might want to avoid the stock of Intel, or else he risks a double whammy to both his income and his assets when that industry goes into one of its periodic swoons. The same caveats apply to regional diversity.
Entrepreneurs often invest in real estate for cash flow, capital appreciation, and personal control.
Take Dan Thompson, president of Vend Alaska, a vending machine company in Anchorage. Thompson has about half his net worth in his company and the rest in local properties and in the stock of a local bank where he's a board member. I have some control over my destiny. I'm an active participant. And he recently bought shares in the National Bank of Alaska to spread his risk across the state.