Investing for High Net Worth Individuals

For high net worth individuals, investing provides them with financial security and enables them to grow their wealth and generate inflation-beating returns. Moreover, investments help the wealthy attain their financial goals, such as purchasing a luxurious estate, creating an emergency fund, or spending a comfortable retirement. If you own $5 million or more in liquid wealth, you should get a free copy of our new book, 7 Secrets to High Net Worth Investment Management, Estate, Tax, and Financial Planning to learn about investing for high net worth individuals.

STRATEGIES FOR FAMILIES WORTH $5 MILLION TO $500 MILLION

 

7 Secrets To High Net Worth Investment Management, Estate, Tax and Financial Planning

 

The insights you’ll discover from our published book will help you integrate a variety of wealth management tools with financial planning, providing guidance for your future security alongside complex financial strategies, so your human and financial capital will both flourish.

Clients frequently share with us how the knowledge gained from this book helped provide them tremendous clarity, shattering industry-pitched ideologies, while offering insight and direction in making such important financial decisions.

At Pillar Wealth Management, we can assist you with investment management. Our fee-only wealth managers provide detailed recommendations to clients with $5 million to $500 million in liquid assets. We also provide investment strategies that apply to affluent individuals. Schedule a complimentary meeting with one of our advisors to find out more about our investment management services.

Investing for High Net Worth Individuals: Understanding the Five Investment Strategies

An investment strategy is a set of principles that guide investment decisions. There are various investment strategies you can use depending on your investing style, risk tolerance, access to capital, and long-term financial goals. In this section, we answer a popular question many investors have on their minds, “What are the five investment strategies?”            

But before that, make sure to ask for a free copy of our book, 7 Secrets to High Net Worth Investment Management, Estate, Tax, and Financial Planning to find out more about the importance of using the right investment strategy.

Strategy #1 – Buy and Hold

The most basic long-term investment strategy is buy and hold investing, where you simply buy stocks and hold them indefinitely. The performance of the portfolio obviously depends on the companies in which you invest. Even though buy and hold investing is the most basic investment strategy, it can be more effective than one might assume. Investors often become their worst enemies and end up selling their investments at the wrong time. This strategy removes this problem from the equation.

Strategy #2 – Growth Investing

Investors determine the holding period based on the value they want to create in their investment portfolio. If investors think that a company will grow in the coming years, and the intrinsic value of a stock will increase, they will invest in such companies to increase their corpus value. This is referred to as growth investing. Conversely, if investors think that a company will deliver good value in a couple of years, they will opt for short-term holding. The holding period also depends on the investor’s preference, for instance, how soon they may need the money to purchase real estate or what their retirement plans are.

Strategy #3 – Value Investing

Value investing entails investing in a company by looking at its intrinsic value, as such companies are undervalued by the stock market. The idea behind investing in these companies is that when the market goes for a correction, it will correct the value for such undervalued companies, and the price will then increase, allowing investors to benefit from high returns at the time of selling.

Value investing has generated the most consistent long-term returns over the past decade. In fact, Warren Buffet built his fortune using this strategy.

Strategy #4 – Dividend Investing

The goal of dividend investing, also called yield investing or income investing, is to create a source of income. Stocks with high dividends yields are generally quite profitable but have fairly low growth rates. As a dividend investor, you should select companies with a good yield and the ability to continue paying dividends.

Dividend investment strategies aren’t just about creating a source of income. If you reinvest dividends, your portfolio can witness significant capital growth as well. Companies that pay dividends are generally very profitable and thus also defensive in times of recessions. 

Strategy #5 – Passive Investing

Passive investing, also called indexing, is a type of buy and hold investing. However, investments are made in indices instead of individual stocks. Passive investing offers plenty of benefits. For instance, investing in market-cap-weighted indices means you are investing in the fastest-growing, large-cap stocks in a stock market.

When you use this strategy, you don’t need to choose stocks. Plus, it makes sure you are holding all the major stocks. Schedule a free video consultation with one of our wealth managers to learn more about passive investing strategies and how they can help you.

How Should I Invest Depending on Age?  

Your age determines how much risk you are willing to take on in your investments. The general rule of thumb is that the younger you are, the higher the risk you can tolerate. However, as you get older, you have to cut back on the amount of risk in your portfolio. If you have liquid assets worth $10 million, don’t forget to ask for our book, 7 Secrets To High Net Worth Investment Management, Estate, Tax, and Financial Planning, and discover that smart investing is about asset allocation, driven by your goals.

In this section, we will explore how you should invest according to age.

Investing in Your 20s

While the main priority in your 20s should be to pay off any credit card debt or student loans you might have and build up an emergency fund, it is also a great idea to start investing for retirement. You can be a little more aggressive with investing at this stage. This means you can invest in higher-risk assets, such as stocks that might offer higher returns than cash or bonds.

One of the best ways to start investing is to register for your employer’s 401(k) plan, assuming they offer one. Having a retirement account lets you save money from your paycheck before taxes are deducted.

If your employer doesn’t offer a 401(k), you can consider opening a Roth or traditional individual retirement account (IRA). Such accounts allow you to choose how your funds are invested.

Investing in Your 30s

Your priorities are likely to change in your 30s. Rather than focusing on paying off student loans, you might be more concerned with the costs of starting a family, saving for your kid’s college education, or making mortgage payments on your home. Also, you are probably further ahead in your career and earning more money than you were in your 20s. Thus, now might be a great time to increase the amount of money you’re investing. With many years to go before retirement, you can still withstand a moderate level of risk. Nevertheless, you might want to consider allocating a little more to more conservative assets, like bonds, to give yourself a bigger cushion.

Investing in Your 40s

At this point, your main priority should be retirement. This is a perfect time to build up your investment portfolio and make sure that you’re en route to your goals.

Your risk tolerance starts to change more considerably in your 40s. While you can still put some of your money into riskier investments, you should properly do your research first. Make sure you’re investing your money in assets with a solid track record of returns, and don’t take unnecessary chances. It’ll be more difficult for you to recover from a loss now than it would’ve been a few years back.

Investing in Your 50s and 60s

With retirement approaching, you may want to take a more conservative approach. A stock market loss can be disastrous for your retirement savings now. It is time to step back on higher-risk assets and play it safe.

The main priority at this age should be crafting a comprehensive retirement plan. When do you plan to retire? Given your retirement savings, at what age will you actually be able to retire? Create a budget to see how much money you will require every month of retirement to live comfortably. If you need to “catch up” on your savings, revisit your 401(k) account. The IRS allows employees over 50 to contribute more to their 401(k) account to effectively prepare for retirement. Solicit our book 7 Secrets to High Net Worth Investment Management, Estate, Tax, and Financial Planning to learn more about investing.

How Do I Start Investing in Value?

Value investing is a strategy that entails choosing stocks that appear to be trading for a value lower than their book or intrinsic value. Value investors actively choose stocks they believe the stock market is underestimating. They think the market overreacts to positive and negative news, leading to stock price movements that don’t correspond to a company’s long-term fundamentals. The overreaction provides a chance to profit by purchasing stocks at discounted prices.

Warren Buffet is perhaps the most popular value investor today. However, there are several others, such as Benjamin Graham, Charlie Munger, David Dodd, Christopher Browne, and Seth Klarman. In this section, we will explore how you can start investing in value. You can schedule a free video consultation with one of our expert wealth managers to understand more about investing in value.

1. Pay Attention to the Intrinsic Value

The most crucial thing that you should understand about investing in value is intrinsic value. In plain words, this refers to the actual value of the stock in the stock market. There are instances when global trends, market conditions, and other factors result in a decline in a stock price below its intrinsic value. Typically, a value investor searches for such opportunities where the stock of a reputable, high-value firm declines due to market events, and then purchases that stock.

2. Margin of Safety

Because value investing focuses on investing your money in a stock that is at a low, the probability of experiencing a price depreciation is much lower than investing in accurately-valued stocks. If a stock has an intrinsic value of $50 and is presently trading at $30, then the $20 difference is a guarantee that you will generate profits, unlike someone who has purchased the stock at its real value. This is referred to as the margin of safety and is a major contributor to value stocks earning more profits.

3. Think Out of the Box

A crucial part of value investing is not to fall for the bandwagon effect. If there’s a stock that most people are investing in, then a value investor will avoid it! Staying away from the herd mentality is the main reason that investors who use this strategy, such as Warren Buffet, have built wealth. The priority of a value investor is to comprehend the stock’s actual value and invest in it when others are ignoring it.

4. Understand that Markets Do Not Behave Efficiently

Value investors do not follow the efficient market concept that states that stock prices already account for all information about a company, so their prices always reflect their true value. Rather, value investors believe that stocks might be under or overpriced for a number of reasons.

For instance, a stock might be undervalued because the economy is not performing well, and investors are selling their stock in panic. Conversely, a stock might be overpriced as investors have become too excited about an innovative technology (as was the case with the dot-com bubble). Moreover, psychological bias can impact a stock’s price, based on news, such as product recalls, litigation, or an unexpected or disappointing earnings announcement. Stocks may also be undervalued as they trade under the radar, implying they are insufficiently covered by the media and analysts.

Wrapping Up

Working with a well-known, well-reputed investment firm can improve your investment portfolio’s performance, enable you to benefit from excellent returns, reduce risks, help you attain your financial goals, and live a financially secure life. One company that can provide you with all these benefits is Pillar Wealth Management. We provide fiduciary investment and wealth management services to ultra-high net worth and high net worth individuals and families. Set up a free meeting with our wealth advisors and determine how we can make the most out of your investments.

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.

More from authors.

Related Posts

  1. Fidelity Private Wealth Management Review – This Fidelity Private Wealth Management review is meant for high net worth and ultra-high net worth families that encounter substantial…
  2. $10 Million Portfolio Review – This $10 million portfolio review is written for high net worth and ultra-high net worth individuals who have plenty…
  3. Charles Schwab Wealth Management: Things to Know – The world is evolving rapidly when it comes to tech advancement, financial evolution, and intellectual awareness…
  4. Hire a High Net worth Financial Advisor — Tax Strategies from Pillar Wealth Management – If you’re a high net worth individual with a high income, you are subject to high taxes, which can be as much as 50% of your income…
  1. Top Ultra- High Net Worth Wealth Management Firms – Wealth management is critical for everybody, but more so for high net worth and ultra-high net worth individuals or families.
  2. High Net Worth Estate Planning – High net worth estate planning is no easy feat. Luckily, you won’t have to tread…
  3. Fidelity Family Office – A fidelity family office is something all high net worth and ultra-high net worth families need, whether they realize it or not..
  4. Wealth Management in Retirement – While the fundamentals of retirement planning remain the same, today’s savers are faced with issues different from those of previous…