Offering Exclusive High Net Worth Portfolio, Estate and Tax Protection Strategies developed over 30+ years
Offering Exclusive High Net Worth Portfolio, Estate and Tax Protection Strategies developed over 30+ years
Do you want to create an investment management portfolio? A vital tool for high net worth and ultra-high net worth investors, creating a diversified investment portfolio can be the key to sustaining your wealth. How do you create a robust investment portfolio, though? You start by hiring a qualified financial advisor. If you are an ultra-high net worth individual with over $10 million in liquid assets, we recommend reading our guide to choosing the right financial advisor.
You can also reach out to one of our wealth managers at Pillar Wealth Management. We offer fiduciary advisory services to high net worth and ultra-high net worth families with $5 million to $500 million in liquid assets. Our team can help you with portfolio design, asset allocation, research and due diligence, tax-loss harvesting, and more. Click here to arrange a free consultation with us.
Read on as we discuss what is an investment management portfolio andwhat is included in an investment management portfolio. We will also talk aboutwhat is a typical investment management portfolio. Let’s begin.
Table of Contents
What Is An Investment Management Portfolio?
An investment management portfolio is a collection of investments that include stocks, bonds, cash, ETFs, and other assets. Investors mix these assets in their portfolio in a manner that helps them generate a specific return. The portfolio return is reflective of their investment goals and risk appetite.
If you are an individual with over $5 million in assets, we recommend hiring a financial advisor for creating and managing your portfolio. A qualified financial advisor will be able to create a portfolio tailored to your goals.
For more information on this, click here to read our guide on how to choose a financial advisor for high net worth families.
What Is Included in an Investment Portfolio?
Now that you understand what is an investment management portfolio let’s take a look at what is included in an investment management portfolio.A diversified portfolio will include some combination of the following:
A stock is a type of security representing ownership in a company. Companies typically issue shares to the public to raise money. A person who buys a share is known as a shareholder. This individual will have a stake in the company’s equity. They will also have a share in the company’s profits. These are in the form of dividend payments made out to the investor. Depending on the percentage of shares you own, a shareholder can also influence company decisions. A shareholder holding over 51% of a company’s shares will be the owner of the company.
Stocks are a common addition to an investment portfolio. They are volatile assets that can help you earn significant returns. However, they also present a certain amount of risk. You can work with a financial advisor to find out which stocks you can invest in to boost your returns while controlling your risk.
To learn more, talk to a wealth manager at Pillar Wealth Management.
A bond is a fixed-income security. Like stocks, it is issued by corporate or government organizations to earn money. The main difference here is that when you buy a bond, you are loaning money to the entity that issued the bond. In exchange, the issuer will pay you back the principal amount at a specified date in the future. You will also receive interest on the principal amount.
Compared to stocks, bonds are low-risk securities and less volatile.
Cash and Cash Equivalents
Cash equivalents are highly liquid securities that can be easily converted into cash. They are used for short-term investing and have high credit quality. Cash and cash equivalents offer low risks and return. They help safeguard your portfolio against market volatility. Some examples of these securities include:
– Treasury bills
– Certificates of deposits
– Bankers’ acceptances
– Corporate commercial paper
– Bills of exchange
To learn more about how different securities impact your portfolio performance, click here to read our guide on the shifts you can make to improve your portfolio.
What are the Most Important Aspects of Investment Portfolio Management?
Managing an investment portfolio can be a challenging task. At Pillar Wealth Management, we focus on the following factors when helping our high net worth and ultra-high net worth clients manage their portfolio:
Diversification is one of the most aspects of creating an investment management portfolio.It helps control your risk and lets you make the most of different asset classes added to your portfolio. As mentioned earlier, a typical investment portfolio will carry stocks, bonds, and cash. There’s a reason for this.
You see, these investment assets move in different directions. Therefore, if one type of security under performs, you can rely on the other two to protect your portfolio from incurring significant classes.
Remember, the focus here is on different types of securities. Your portfolio won’t be appropriately diversified if you simply invest in different stocks. For instance, suppose you invest in 10 different companies in the energy sector. On the face of it, it may seem like you have a diverse portfolio. However, any changes that impact the energy sector will affect the value of all of your stocks.
The same can apply to stocks spread across different sectors. Normally, if the stock market crashes, all sectors suffer, some more than others. If this happens, your portfolio will take a hit. Investing in bonds and cash can help cushion some of the blow.
To ensure this, we recommend choosing a financial advisor who understands how portfolio diversification works. If you need help, we recommend reading our guide on selecting a financial advisor for ultra-high net worth families with over $10 million in liquid assets.
All investment assets present a certain amount of risk. Therefore, the next thing you need to consider is how you will manage your portfolio risk? What’s your risk tolerance like? Most investors believe that high risks equal high returns and vice versa. While this can be true, you don’t need to be overly conservative to avoid excessive risk.
A strategic approach to risk management can help you out here. At Pillar Wealth Management, we conduct portfolio stress tests and utilize an Efficient Frontier. The goal of the Efficient Frontier is to ensure you are earning optimal returns without exceeding your risk threshold.
Our portfolio stress tests also let us test the resilience of your portfolio against unfavorable market conditions. These tests are carried out using data that goes as far back as 1925. We use this data to run simulated scenarios and observe how your portfolio will be affected during events such as a war or a health crisis. By testing for these situations, we are better prepared to manage any real-life events that impact the health of your portfolio.
To learn about our risk management techniques, order a hardcover copy of our book The Art of Protecting Ultra-High Net Worth Portfolios and Estates – Strategies For Families Worth $25 Million To $500 Million. It’s free!
Choosing Between Passive and Active Investment
The investment style you choose will also influence your risks, returns, and costs.Active management involves making real-time modifications to your investment fund to beat the market. Active managers will buy and sell securities to avoid potential market risk and leverage new investment opportunities as they appear. In doing so, they hope to generate higher returns than the market. However, this investment approach also comes with significant risk. It is also costly. Typically, active managers charge a higher fee. Moreover, SPIVA suggests that nearly 89% of domestic actively managed funds underperformed from 2003 to 2018.
Active management has its advantages, but you need to balance things out a little to control your tax burden and other costs. That’s where passive management comes in. Passive managers will prepare an investment fund that mirrors a particular market index. It focuses on generating long-term gains and is less costly in terms of taxes. Passive managers also charge a lower fee than active managers.
At Pillar Wealth Management, we believe in opting for a strategic approach and combining both investment styles. This allows our investors to grow their returns while controlling their risk and investment costs.
Change is a part of nature. Even if you create a robust investment management portfolio at the onset, you need to revisit it at some point. Some of the reasons for this include:
- Your portfolio is not delivering the returns you desired
- Your risk appetite or investment goals have changed
- Market conditions suggest you must modify your portfolio to protect your assets
This is where portfolio rebalancing comes in. At Pillar Wealth Management, we track your portfolio performance and analyze whether it is performing as per your expectations. We also take into account any changes in your goals and how this affects your portfolio. For example, a portfolio designed for an investor in their 40s would be different from a portfolio meant for an investor approaching retirement.
Rebalancing your portfolio based on these factors is essential for holistic wealth management. It lets you prepare for new situations and tackle new challenges while securing your wealth. To learn more about portfolio rebalancing, click here to book a free consultation with us.
What Is In A Typical Investment Portfolio?
At this point, you are probably wondering what is a typical investment management portfolio?There is no standard template you can follow for creating an investment portfolio. In fact, if you are working with a financial advisor who offers a cookie-cutter solution to portfolio design and management, then we suggest making a change.
Your financial advisor must design a portfolio that takes your individual needs and assets into account. This can help you maximize the performance of your portfolio and help you get closer to your goals. For example, let’s suppose you want to build an investment portfolio that helps you maintain your status quo. You are not looking for excessive risks and would be happy if your returns reflect those of the market.
Now, let’s assume that the financial advisor you hire for designing your portfolio suggests building an actively managed fund. This fund would involve a significant amount of risk. Your wealth manager may encourage you to go for it anyway because you can potentially earn high returns. That’s great, but it’s important to remember you weren’t looking for high returns in the first place. If you are approaching retirement, you need security and peace of mind. You don’t want to spend your time worrying about how your portfolio is performing.
In the end, you are not reaching your goals. Instead, you are paying more in investment costs. If something goes wrong, you could lose a lot of money too. At Pillar Wealth Management, we track your goals obsessively. Our aim is ensure you achieve what you wanted when you sought our help.
Wrapping It Up
If you were wondering what is an investment management portfolio and what is included in an investment management portfolio, we hope you got your answer. Remember, your portfolio needs to be diversified and tested for risk. You should also choose an investment style that suits you and rebalance your portfolio periodically to ensure your financial security.
If you are a high net worth individual or ultra-high net worth individual with $5 to $500 million in liquid assets, we can help you with portfolio management. We are a fiduciary advisory firm having more than 60 years of combined experience in wealth management. Our team can help you create an investment management portfoliothat aligns with your goals and risk appetite. With our help, you can secure your financial future and retire in comfort.
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