What’s more important for wealth management Boise firms? Asset allocation or performance? As an ultra-high net worth individual, we are sure you have worked with wealth managers that focus on performance. It is not uncommon. Numerous wealth managers will chase after short-term performances to grow your net worth. There is no denying that performance is essential. However, when it comes to ultra-high net worth retirement planning, smart asset allocation strategies and money management are far more important. As we’ll discuss below, failing to focus on this aspect can cause your losses to pile up and diminish the value of your assets significantly.If you have liquid assets valued at $10 million and more, and your current financial advisor Boise doesn’t focus on asset allocation, then you might want to consider making a change. Read our free guide on choosing the best wealth management advisor to find out more about this. You can also get in touch with Pillar Wealth Management and schedule a free consultation.
Pillar Wealth Management offers fiduciary advisory services to individuals having $5 million to $500 million in liquid assets. Our wealth managers cater to high net worth and ultra-high net worth investors and help them realize their investment goals. We utilize carefully curated investment strategies that minimize your costs, increase your gains, and optimize the performance of your portfolio. Read on as we discuss how healthy asset allocation can make a difference here.
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What Is Healthy Asset Allocation?
Before we discuss its importance, let us take a minute to discuss what healthy asset allocation is for high net worth investors. To put it simply, healthy asset allocation refers to creating a balanced portfolio consisting of equities, bonds, and cash. This allows for appropriate diversification and risk management. You would expect any reputed wealth management Boise firm to incorporate this in their wealth plans.
Pillar Wealth Management has been helping individuals and families, who have $5 million to $500 million in investible liquid assets, with their asset allocations for more than 30 years. If your current investment portfolio does not focus on all three of these liquid assets, then you need to reconsider your approach.
Let’s see what happens when you use smart asset allocation strategies for ultra-high net worth retirement planning. And, by the way, feel free to start a conversation with Pillar Wealth Management to discuss any questions that you may have about optimal asset allocation strategies.
Why Are Healthy Asset Allocation Strategies Critical for Wealth Management Boise Firms?
As an ultra-high net worth investor, healthyasset allocation strategies and money managementare the key ingredients to win. Here are our top 5 reasons for stressing on healthy asset allocation:
1. Helps in Navigating Market Volatility
No matter how smartly you invest, the market will continue to remain volatile. Many wealth managers try and avoid losses by timing the market, but this does not help. If you want to secure your wealth, you can invest in low-risk assets that generate low returns and call it a day. This can help you avoid losses, but it will also reduce your gains. That doesn’t sound very appealing, does it? It is also not lucrative for ultra-high net worth retirement planning.
Healthy asset allocation is an infinitely smarter approach here. It can minimize the losses that result from market volatility while still helping you capitalize on gains when the market is performing well.
Are you wondering how? It’s simple. When you invest in equities, you tap into a highly volatile stock market. There are so many variables at play here that can increase or decrease the value of the stocks you purchase. While you can generate significant returns, you must also prepare for downturns in the market.
On the other hand, bonds and cash make for less volatile investment. Bonds can change in value, but these changes don’t occur as often. Cash behaves in the same manner. The gains are smaller, but assets such as treasury bills and high-yield savings accounts are very stable.
Adding bonds and cash to your portfolio can help you counteract the volatility introduced by equities. It balances and stabilizes your portfolio and protects it from unnecessary risk. To learn more about optimizing portfolio performance without taking on an excessive amount of risk, click here to read our guide.
2. Allow You to Reduce Taxes
As your income grows, so will your taxes. For high net worth investors that fall in the highest tax bracket, trading stockstoo frequently can become a nightmare. If you are buying and selling equities throughout the year, then the capital gains you achieve on these investments will be taxed at 37%. This can be very costly.
At Pillar Wealth Management, we opt for long-term strategic investment planning that enables tax minimization. For instance, if you invest in tax-managed funds or exchange-traded funds, then you will generate lower capital gains. This automatically means lower taxes.
The same applies to bonds. Investing in municipal bonds, treasury bonds, and Series I bonds is great for tax minimization. The interest income on municipal bonds cannot be taxed at the federal level. In the case of treasury bonds and Series I bonds, any income you generate will not be subject to state or local taxes.
Holding equities in the long-term can help minimize your taxes too. Unlike the short term capital gains you generate by buying and selling securities, the long-term gains you generate are taxed at 20%. Long-term investments in equities can do wonders for your net worth too. We’ll discuss this in the next section.
Besides this, if you are looking to sell short-term securities, then we suggest doing this when the tax rate gets cut. This allows you to retain your gains and pay lower taxes.
We also recommend selling your assets to generate gains when you have incurred large capital losses. In such cases, the capital losses you suffer can reduce your gains, but they will also reduce the amount of tax you pay. This is known as tax loss cultivation. To learn more about how tax loss cultivation works, click here to schedule a free consultation with us.
3. Helps Generate Higher Gains
So far, we have discussed how investing in bonds and cash can help you avoid market volatility. Investing in bonds and long-term securities can also reduce your tax payments. That’s not all, though. A healthy asset allocation lets you grow your net worth by making the most of bullish market trends while taking on a reasonable amount of risk.Choosing the best wealth management advisor is critical here.
What you need is a wealth manager that understands the intricacies of market performance and helps you make the most of short-term and long-term investments. Even if you generate capital losses, the presence of high-value equities in your portfolio can reduce the impact of any dips in the market. These high-value equities help generate compounded returns over time. Besides this, a long-term investment strategy is also less costly. It involves lower fees and expenses, which automatically boosts your gains.
There are plenty of other costs that you can avoid too. For instance, you need to watch out for commissions, bond sale spreads, internal expenses, and more. To learn more about these costs, and how they affect your profits, start a conversation with Pillar Wealth Management.
We also suggest that you order a free 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.
The clients who have read this book have shared how it helped them understand the nuances of high net worth investments and how the right strategy can help one achieve true financial serenity.
4. Focuses on Achieving Goals
Another reason why asset allocation strategies and money management are superior to the performance-based approach is that the former prioritizes the investor and their goals. By running after performance, many wealth management Boise firms and financial advisors tend to lose sight of what is essential for their clients. It is simple. Why take on so much risk when it is not getting you any closer to your goals?
At Pillar Wealth Management, our wealth managers will discuss your investment goals and how you want to use your assets. These goals are then used to formulate a tax-efficient, risk-tolerant, and diversified portfolio. Our customized approach to wealth management allows you to control the amount of risk you take on, identify opportunities to maximize your gains, and get you one step closer to your goals.
Instead of focusing entirely on performance, we stress on helping you achieve the financial security you need to live the life your desire. For instance, suppose that you are looking to generate a monthly income of $35,000 after paying taxes. Our team will run your numbers and suggest a suitable asset allocation that lets you generate your desired income without taking on additional risk.
On the other hand, if a wealth manager chooses to chase performance instead and exposes you to extra risk, but only helps you earn $33,000 every month, then you are losing out on all fronts. By balancing risk with security, asset allocation makes it much easier to achieve your goals and allows your money to last longer.
As an investor, you need to shift your focus from performance to financial security. Want to know more about this? Click here to go through our guide on the 5 essential shifts that every high net worth investor must consider making to optimize wealth management.
5. Balances Between Active and Passive Management
We have discussed how focusing solely on short-term gains by trying to time the market can lead to higher taxes and expose you to more risk. On the other hand, holding long-term securities can grow your returns in a more stable manner. The former is a technique used by active managers. The latter is utilized by passive managers.
Which is better, though?
In our experience, a balanced portfolio that makes the most of active and passive management works best. Healthy asset allocation helps you achieve precisely that. We help our clients invest in assets that can help them control their costs, increase their profits, and help achieve financial serenity.
Our strategic investment approach borrows the best elements from active and passive management to provide you with a more comprehensive investment strategy. This can help you create a high-performance portfolio that optimizes your short-term and long-term gains while controlling your risk.
For investors in their 40s or 50s, this type of strategic investment approach is ideal for ultra-high net worth retirement planning. It can help you bear the losses that come with short-term investments and bounce back from market downturns, while also growing your wealth in the long term.
In the case of older investors who are in their 60s or 70s, we can balance their asset allocation to make more room for passive management and help them reduce their risk as much as possible. This can allow them to continue growing their wealth without compromising their financial security. Once again, choosing the best wealth management advisor is important here. Click here to read our guide on how you can find the right financial advisor to help you find a balance between active and passive management to suit your priorities.
Create a Smart Asset Allocation Strategy With Pillar Wealth Management
Choosing the best wealth management advisor can be hard. If you are unsure of the parameters of a good wealth management Boise firm or a wealth manager, start by asking them about how they plan to allocate your assets. If your wealth manager is investing too heavily in equities, but not enough in bonds and cash, then this is a warning sign. As we have discussed, this can leave you exposed to market volatility and rapidly increase your risk.
Remember, prioritizing healthy asset allocation strategies and money management is essential for optimal wealth management. At Pillar Wealth Management, we utilize a number of risk assessment techniques that help us create a healthy portfolio and strategically allocate your assets to ensure maximum returns. Our primary aim is to offer you custom wealth management services that put your financial goals at the forefront and help strike the right balance between risk and security. We also aim for cost minimization and help you plan your retirement to create the financial legacy you desire.
To learn more about Pillar Wealth Management and how you can benefit from a true fiduciary, book a free consultation with us.
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