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How important is your wealth to your family and yourself? Why do you value it so much? Often, the entire reason for accumulating wealth over time is to provide your family with a better quality of life. Because of this, it only makes sense to protect it.
While there are quite a few ways to protect your money, let’s take a few minutes to talk about investment management and why this is one of the best ways.
When it comes to high net worth investment strategies, diversification can be the most obvious move for those who do invest. Well, that and hiring a professional who manages investments and takes care of the performance of any assets that might be in your portfolio. Knowing where and when to invest can be the difference between making money and losing it.
Any investment manager worth his or her salt will diversify your investments across asset classes to lower your investment risk. This will balance the investments so that if one of them suffers, there’s another behind to maintain an equilibrium. This is why you never put all of your eggs in one basket.
Typically, asset classes are things like cash, bonds, and stocks. Based on your time frame and your tolerance for risk, your active management advisor will come up with a ratio for your portfolio. When you’re talking to potential advisors, ask them what they’d use as a general rule of thumb. How they’ll manage the exposure of your portfolio is important.
Finding and using a professional for portfolio management and guidance will ensure you’re sufficiently diversified because it will include stocks from a variety of sectors as opposed to just owning some in a single sector. Yes, you might devise your own investment strategy, but you won’t have the knowledge or expertise of a professional. These managers will likely include things like bonds and other types of fixed-income securities in order to protect you from dips in the market.
Based on whatever your financial situation might be, they might also add things like TIPS (Treasury Inflation-Protected Securities), commodities, real estate, alternative investments, and more.
It goes without saying that all of this will need to be agreed upon by you. If you feel that something isn’t right, or that you need to ensure their values are in line with yours, don’t hesitate to ask more questions before signing on the dotted line.
The first instinct some people have is to ask those they know who they use to manage their wealth. That said, this won’t be too effective if they have a financial situation that doesn’t match yours. Other people may go online and search for investment managers in their area, but they might not be rewarded with the in-depth information they need, like the investment methods, structure for pricing, and any benchmarks utilized.
It can help to ask critical questions, especially when you know that your family’s financial health is what’s at stake. You need to hire a manager you can trust and who can be relied upon for any and all financial guidance. If you interview potential managers with your partner, they should address you as equals. You also need to know if they’re able and willing to collaborate with other professionals you may have on your team, like lawyers or CPAs.
Finally, make sure that you get all of the pricing information you need in writing and that you have a good understanding of what it is you’re paying for, even while your portfolio is growing.
Disclaimer: MoneyMagpie is not a licensed financial advisor and therefore information found here including opinions, commentary, suggestions or strategies are for informational, entertainment or educational purposes only. This should not be considered as financial advice. Anyone thinking of investing should conduct their own due diligence.