Asset Portfolio: What High-Net-Worth Investors Need to Know

High-net-worth individuals with assets worth over $5 million understand that investing in multiple assets and creating a diversified portfolio is the key to generational wealth sustainability and success. However, identifying the right market opportunities, partaking in numerous investments, and managing diversified asset portfolios can be tricky for individuals and even internal finance teams. Therefore, high and ultra-high-net-worth individuals seek portfolio management services to streamline the processes and gain maximum benefit from the acquired assets.If you have investments in liquid assets worth $10 million or more, our exclusive guide for families with a liquid investable portfolio can guide you in the right direction.

It is important to understand that receiving high returns from investments does not always mean an increase in wealth. Inflation, taxes, broker fees, and other associated expenses can cost you a considerable amount, depreciating your total gains. Therefore, it is essential to take the time to learn more about asset portfolio management to minimize losses. Our high-profile portfolio managers can also help in this regard.

Pillar Wealth Management is a fiduciary advisory firm with decades of combined experience in providing financial and advisory services to high-net-worth individuals with $5 million to $500 million in liquid investment assets. We specialize in portfolio management services geared towards asset investments to fortify wealth and gain capital returns. You can connect with our team to arrange a free consultation to explore your options and learn more about our services.

Understanding High-Net-Worth Asset Portfolio Management

For any high-net-worth individuals, the ultimate goal is to maximize growth without unnecessary risks. In order to achieve this goal, it is essential to learn about investment or asset portfolios. Read on to learn about assets and portfolio management, including what is asset portfolio, what are the different types of portfolios, how many asset classes are in a portfolio, what is the riskiest asset class, what is the safest asset to own, and more.

asset profile

What Is An Asset Portfolio?

A portfolio can be defined as a collection of investments, including cash, bonds, stocks, commodities, and other cash equivalents. It is commonly believed that bonds, stocks, and cash are the core components of a portfolio. While this is often the case, it is not the rule. An asset portfolio may comprise a wide range of assets, including valuable art pieces, real estate, and private investments. You can learn more about asset management and investment portfolios in our exclusive guide on the 5 critical shifts that impact investment portfolios.

When it comes to wealth sustainability, asset diversification is the key concept in portfolio management. You can think of it as making sure you don’t put all your eggs in the same basket. In other words, diversification minimizes the risk by allocating wealth among various assets. The goal is to maximize profits by investing in areas that would react differently to the same economic events. There are many ways to diversify. Some critical factors to consider while assembling and adjusting a portfolio include investment objective, tolerance for risk, and time horizons.  

Types of Portfolio

There are different types of portfolios and portfolio strategies. The best type of portfolio for you is the one that aligns with your family values, business goals, and business acumen. You can also choose to have several portfolios to meet the varying needs of different strategies or different investment scenarios. Read the 7 secrets revealed by 30+ financial advisors on High-Net-Worth management for families with liquid investable portfolios in our exclusive guide.

When a portfolio is leveraged for investment purposes, it is expected that financial assets, such as stocks and bonds, will grow over time or gain high returns. Portfolio investment can be of two types:

• Strategic: It entails purchasing assets with the intention to hold them for a long time. It is a highly suitable approach for assets whose value increases with time.

• Tactical: It entails purchasing assets with the intention of reselling them in the market for a higher price to achieve quick, short-term gains.  

 

1.    Hybrid Portfolio

The hybrid portfolio approach is closely related to asset diversification. It revolves around diversifying assets across different asset classes. Generally, the high-net-worth individual takes positions in stocks in addition to other commodities, art, real estate, bonds, etc. This kind of portfolio typically proves to be highly beneficial because it involves a relatively fixed portion of bonds, stocks, and similar investments that often exhibit less than perfect correlations with one another. These portfolios are designed to offer long-term monetary growth at a reduced risk.    

2.    Defensive Portfolio

If you want to play it safe and steady, a defensive portfolio is the one for you. It is equities-focused in nature and typically focuses on consumer staples or essential products, such as food and beverages, household goods, vehicles, etc. Market demand for these products is generally high as people are unable to cut them out of the budget. Therefore, consumer staples are often impervious to downturns. As a result, defensive stocks are likely to do well year-round regardless of the economic situation.    

3.    Aggressive Portfolio

Want to accumulate wealth? An aggressive portfolio may be the best choice for you. It is more spontaneous, meaning the underlying assets are more likely to assume greater risks for greater returns. The most common approach is to identify companies that offer a unique value proposition while still in the early stages of their development. Investing in such ventures is generally considered to be riskier, but it can also boost returns.

4.    Income Portfolio

Another kind of asset portfolio is an income-focused equities portfolio. It focuses on returns from dividend-paying stocks or stakeholder distribution. Keep in mind that some stocks in the income portfolio may overlap with the stocks in the defensive portfolio. However, for income portfolios, they are selected owing to their high returns. When strategically planned and executed, an income portfolio generates positive cash flow. The ultimate goal of an income portfolio is to secure a regular income for the client instead of bringing in major capital gains to provide prolonged financial security.

These are some of the portfolio approaches that you can consider to direct your business to success. As stated above, many financial advisors keep multiple portfolios for different purposes. Contact the experienced team at Pillar Wealth Management. Our portfolio experts will guide you at every step and develop strategies to transit you from where you are to the future you’ve envisioned for yourself.     

You can also check out our book, “The Art of Protecting Ultra-High-Net-Worth Portfolios and Estates – Strategies For Families Worth $25 Million To $500 Million,” to learn more about growing and protecting your portfolio.

How Many Asset Classes Are In A Portfolio?

Now that you know all about different kinds of portfolios, let’s take a look at how many asset classes are in a portfolio?

Assets fall into different classes. In order to deal with investments and create impressive portfolios, it is essential to understand different asset classes. But what is an asset class, anyway? Well, it can be described as a collection of investments that are similar in many ways, including how they behave in the market, how different economic events might impact them, the buying process, and how they are regulated.

Traditionally, there are three main asset classes. However, financial advisors generally agree that assets can be broadly categorized into four main classes, namely equities, fixed-income and debts, cash equivalent and money market, and real estate and tangible assets. An asset portfolio is considered balanced if it includes assets from all classes. This is the ideal case as it minimizes risks while maximizing returns. On the other hand, if your portfolio is needlessly heavy in one class or some of the classes are performing poorly as compared to others, you may be in trouble. Financial advisors at the Pillar Wealth Management team can aid you in maintaining a healthy, well-balanced portfolio. You can contact our team at Pillar Wealth Management to arrange a consultation.  

The Four Asset Classes

Take an in-depth look at different asset classes.

1.     Equities

The best way to define equity is as “ownership.” As a high-net-worth individual, when you invest in a company to purchase shares, you buy a part of the ownership of that company. For instance, if a company has 100,000 shares out of which you purchase 1000, you own 1% of the company. Consequently, you have the right to 1% of the total company profits that are generally paid to investors as dividends. Keep in mind that while all stocks are generally lumped together, you cannot apply the same investing principle in every case. For example, investing in a blue-chip stock is very different than buying shares of a startup. Therefore, it is best to leave it to professionals to identify the most lucrative investment opportunities in the market. Our exclusive guide for families with a liquid investable portfolio can guide you in the right direction to find the right financial advisors.

2.     Fixed Income and Debt

The second type of asset is fixed income and debt. High-net-worth investors can purchase an institution’s bonds, which is essentially the same as lending money to the said institution. In return, the institution agrees to pay interest on the loaned money in periodic payments. The payments are generally made to the bondholder throughout the lifetime of the bond until the maturity date of the bond arrives. At this point, the principal amount is returned to the bondholder. For instance, let’s say you purchase a 5-year bond worth $1,000 with an interest rate of 2%. The bond will generate biannual payments of $10 for the next five years.   

3.     Money Market and Cash

Cash can be described as money in any currency. It can be in the form of bills, coins, or the balance in your bank account. Furthermore, this asset class also includes highly liquid investments, also known as cash equivalents. These investments can be quickly converted into cash when required, usually within 90 days or less. The major difference between cash equivalents and other assets is that cash equivalents have a determined market price that does not fluctuate.

4.     Real Estate and Tangible Assets  

Any assets that can be seen and touched physically qualify as tangible assets. Real estate is the most common type of tangible asset, but it’s not the only asset in this class. Commodities, such as livestock or gold, also fall into the same category. The best thing about tangible assets is that they are most likely to withstand inflation.

A healthy asset portfolio contains assets from all classes. You can learn more about how to improve your portfolio performance in our exclusive guide on portfolio performance for ultra-high net value individuals. 

Important Decision: Where to Invest?

The purpose of categorizing assets into four different classes to be represented in your portfolio is to make it easier for high-net-worth investors to manage their asset portfolios. Typically, younger investors opt for more aggressive portfolios. On the other hand, if you are approaching retirement, you may want to take a more conservative approach to ensure sustainability in the long-run. Another important factor to consider while creating or adjusting a portfolio is a risk, which brings us to two very important questions:   

1.    What Is The Riskiest Asset Class?

Stocks can offer high returns. However, the thing to understand bout stocks is that they also come with much greater risks as compared to other assets. As a shareholder, your money is subject to the performance of the institution that you have invested in, while you have little to no control over how the money is leveraged. Therefore, equities are generally considered to be the riskiest asset class.              

2.    What Is The Safest Asset To Own?

Fixed income and debt is inarguably the safest asset class to own. However, keep in mind that bonds don’t generally offer the highest returns. Plus, the returns are spaced out and spread over a period of several years. Some of the other safest assets to own include real estate and tangible items, particularly gold.

Conclusion

Asset portfolio development and planning can make or break your financial future. Developing a comprehensive asset portfolio based on your end goals and how you strive to achieve them requires years of experience and expertise in high-profile portfolio management services.

At Pillar Wealth Management, we provide highly tailored portfolio strategies to complement your financial profile and suit your needs. Our financial advisors and asset portfolio managers work exclusively with high and ultra-high-net-worth clients with $5 million to $500 million in liquid assets. Connect with the team at Pillar Wealth Management to learn more about our financial and advisory services and boost your portfolio performance.

Authors

To be 100% transparent, we published this page to help filter through the mass influx of prospects, who come to us through our website and referrals, to gain only a handful of the right types of new clients who wish to engage us.

We enjoy working with high net worth and ultra-high net worth investors and families who want what we call financial serenity – the feeling that comes when you know your finances and the lifestyle you desire have been secured for life, and that you don’t have to do any of the work to manage and maintain it because you hired a trusted advisor to take care of everything.

You see, our goal is to only accept 17 new clients this year. Clients who have from $5 million to $500 million in liquid investable assets to entrust us with on a 100% fee basis. No commissions and no products for sale.

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