A reverse side hustle can help you make more money while lowering your risk. We share three principles of finance, so you understand how this works.
We discussed reverse side hustles on The BIGG Success Show today. Here’s a summary of that discussion.
This show was inspired by our last show on how to fund your passion. We got a number of questions about this concept of reverse side hustles. So, we decided to continue the discussion.
Today, we talked about three reasons a reverse side hustle can help you make more money while lowering your risk of reaching BIGG success. Much of this discussion applies to regular side hustles as well.
A reverse side hustle diversifies your income stream
“Don’t put all your eggs in one basket”. Diversification is a timeless principle of finance.
As you grow richer, it is wise to diversify your assets. But what do you do if you don’t have assets to diversify?
Diversify your income. A reverse side hustle can provide a steady income stream to complement the ups-and-downs in the cash flow of your business.
A reverse side hustle is like building a portfolio
This is another basic principle in modern finance. Holding one asset means you have just that – an asset. Add a second one and you have a portfolio.
Optimal portfolio theory says, to lower your risk without dampening your returns, you want to combine low risk assets with higher risk assets.
Low risk assets protect your downside; you build your wealth with higher risk assets.
While entrepreneurs are masters of minimizing risks (and entrepreneurs look at risk much differently than financiers), the income stream from any business can generally be viewed as carrying a higher risk.
A reverse side hustle can (and should) provide a lower risk stream of income.
But, another finance basic is: The higher the risk, the higher the return. Your business will provide a greater upside. Your reverse side hustle will help protect your downside.
Think about your reverse side hustle as a bond
One way we can look at a portfolio is with two sides. One side is growth; the other side is income.
For example, you may invest in stocks for capital appreciation (i.e. growth). You invest in bonds for income.
In the situation we’re talking about today – you own a business with a reverse side hustle – your reverse side hustle is like a bond. It kicks off income.
Bonds are rated. It helps investors assess the risk. You will want to rate potential reverse side hustles in a similar way.
“A reverse side hustle helps you reduce the risk of reaching BIGG success!”
TWEET the BIGG Takeawy
Here’s to your BIGG success!
George “The Professor” & Mary-Lynn
Co-Founders, BIGG Success
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