Wealth Management Hawaii: How Can Strategic Investment Management Help High Net Worth Investors?
What sets high net worth and ultra-high net worth investors apart? Smart equity strategies and wealth management. The right investment techniques allow high net worth individuals to retain and grow their wealth consistently to realize their financial goals. Of course, too many risky investments and lack of diversification can also do the opposite. If you are a high net worth investor in Hawaii, wealth management equity strategies can be a critical tool for protecting your wealth. Working with the right financial advisor for wealth management, Hawaii can make a big difference here. It can help you develop a sound investment strategy for accumulating and preserving your assets. If you have an ultra-high net worth of over $10 million, then we strongly suggest you read our guide on choosing the right wealth manager for managing your assets.
STRATEGIES FOR FAMILIES WORTH $5 MILLION TO $500 MILLION
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.
Pillar Wealth Management offers premium wealth advisory services to high net worth investors with $5 million to $500 million in liquid assets. If you are seeking help with investment management, then we can assist you. We also specialize in other aspects of private wealth management, such as estate planning, financial planning, developing alternative investment strategies, tax planning, etc. If you are tired of using the same standard solutions to wealth management and are looking for a more strategic approach that can add value to your estate, click here to book a free consultation session with our wealth managers.
In this blog, we will be discussing some essential concepts related to wealth management, such as a defensive equity strategy and a core equity strategy. We will also be talking about how high net worth individuals can use strategic investment management for realizing their goals and planning for retirement.
Table of Contents
What Is a Defensive Equity Strategy?
Understanding how investment management works is essential for handling your assets properly and protecting their value. For starters, there is a commonly held belief among investors that high-risk investments deliver high rewards. However, history tells us otherwise. Research suggests that if you are considering two types of securities from the same asset class, then high-risk securities may not generate higher returns than low-risk ones.
In fact, low-risk securities tend to produce much higher returns compared to the amount of risk they pose. There are many theories for this phenomenon. The simplest explanation would be that high-risk securities tend to be in more demand. This can increase their price, and as a result, they end up producing lower returns.
Naturally, it’s the opposite for low-risk stocks. Since the demand for these securities is considerably less, the price is also lower. Consequently, these stocks perform better.
The defensive equity strategy essentially capitalizes on this phenomenon. It delivers an equity risk premium and helps you grow your wealth by buying low-risk securities. You can play it safe while still producing high returns. This type of investment strategy allows high net worth investors to aim for wealth accumulation and wealth preservation at the same time.
How Can You Choose Defensive Stocks?
It goes without saying that choosing safe stocks is central to executing a defensive equity strategy properly. If you are looking to utilize this investment strategy for wealth management, Hawaii, then here’s a tip to keep in mind when purchasing company stock – low-risk stocks tend to belong to companies that:
- Have a high-profit margin on their products or services
- Generate sustainable profits every year
- Have a low credit risk
Companies with a low risk also have a low beta, i.e., their stocks are less volatile compared to the market. If you are interested in learning more about this type of investment strategy, click here to talk to one of our wealth managers.
What Is a Core Equity Strategy?
A core equity strategy refers to the core holdings in your investment portfolio. These are investments that you hold onto in the long-term because of their quality, consistency, and low volatility. Core holdings tend to define the fundamental aspects of your investment portfolio. They add stability that cannot be found in short-term securities. Since they are stable and make for high-quality investments, investors may also allocate a bigger portion of their portfolio to core holdings.
What Investments Can be Included in a Core Equity Strategy?
When developing a core equity strategy, it’s essential to understand which investments make for core holdings. For starters, core holdings may expose investors to different types of asset classes. In such cases, you may consider a mutual fund as a core holding. A mutual fund is an investment vehicle that uses money pooled in by multiple investors. This money is then invested into a variety of asset classes such as stocks, bonds, certificate of deposits, Exchange Traded Funds, and more.
An index fund may be considered as a core holding, as well. This investment offers investors exposure to a variety of sectors in the stock market.
Other examples of core holdings include Exchange Traded Funds since they make for low-cost investments that can be managed passively without generating excessive short-term capital gains. Investors can also consider investing in blue chip companies as part of their core equity strategy. These stocks are stable in terms of their value and perform well. You can expect to earn a reasonable profit in the form of dividends by holding onto these securities.
The Main Takeaway
If you notice, both core equity strategies and defensive equity strategies have one thing in common—they aim for high-quality, low-risk investments that allow the value of your investment portfolio to grow at minimal risk. These aspects are critical for sustainable wealth management. Therefore, it goes without saying that for investors in Hawaii, wealth management equity strategies should account for core holdings and defensive stocks to minimize risk, stabilize returns, and accumulate wealth.
If you are an ultra-high net worth investor with over $25 million in liquid assets and are looking to learn more about wealth management, Hawaii, then we recommend you also 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.
Why Do You Need A Strategic Approach to Investment Management?
Strategy is everything. Whether you are opening a new business, establishing annual sales targets, or managing your investments, having a strategy is the key to success for all business and financial activities.
A strategic approach to investment delivers the following benefits:
Helps You Achieve Financial Serenity
All investors have one goal in mind when investing: to achieve financial serenity. A strategic approach to investment management allows you to achieve precisely that. Instead of investing in random stocks and securities, you choose to invest in securities that get you closer to your financial goals. This introduces an automatic check and balance to your investment portfolio. If a particular security doesn’t appear to be performing as expected and is not contributing to your investment plan, then you can sell it in exchange for other assets that suit your investment objectives.
All of this sounds relatively straightforward, doesn’t it? Unfortunately, it is not. There are multiple variables involved in investment management that can steer you off course. One of these is the financial advisor you are working with. Many high net worth investors work with financial advisors that emphasize on performance over financial serenity. If you are in a similar situation, then we suggest you read our guide on the 5 critical shifts in mindset that every high net worth investor needs to consider for sustainable wealth management. It will make you reconsider a lot of conventional approaches to investment management that do more harm than good to your investment portfolio.
Makes Sure You Invest In the Right Assets
Whether you are investing in stocks, bonds, or cash-based assets, choosing the right type of security is essential. For example, if you are investing in stocks, then you need to develop a strategy for stock selection. This strategy will be created based on your investment objectives, risk tolerance, expected rate of return, and the percentage of your investment portfolio that you want to allocate to stocks.
With respect to bonds, you want to choose bonds that are tax-free or generate reduced taxes at the federal or state level. For instance, you don’t have to pay federal taxes for interest income earned on municipal bonds. The same applies to Series I bonds and treasury bonds. The income earned on these bonds is exempted from local and state-level taxes.
You should also consider the total income generated on these securities and choose bonds with an AAA+ rating to minimize your risk.
Introduces the Right Amount of Diversification
As mentioned during our discussion on core equity strategies, diversification is an important part of investment management. An undiversified investment portfolio is equivalent to putting all your eggs in one basket.
Even if you are pursuing a defensive equity strategy with low-risk investments, you must diversify your assets in a healthy way. Typically, this means investing in bonds and cash along with equities. A healthy asset allocation can help you generate a higher premium while controlling your risk. Taking on a strategic approach to investment management allows you to achieve this more easily. You can consider diversification as an investment objective and build your investment portfolio accordingly.
If you are interested in learning more about why so many investment firms fail to ensure a healthy asset allocation, click here to read our guide on improving portfolio performance for high net worth investors.
Enables Constant Monitoring and Rebalancing
Change is a natural part of investing. Securities increase and decrease in value. Markets undergo bearish and bullish trends. Interest rates rise and fall on a periodic basis. Everything is in a state of flux.
Developing a strategy for accurately anticipating, monitoring, and adjusting for these changes is vital for investment management. Without this, there is a significant chance you will lose out on new investment opportunities. Furthermore, if your assets drop in value, then your losses could pile up and reduce your net worth.
A strategic approach introduces the necessary damage control required to prevent this from happening. It also allows you to rebalance your portfolio to suit your changing financial needs and risk tolerance. For instance, younger individuals can invest more in equities to earn high returns. However, as you grow older and your priorities shift, you can rebalance your asset allocation to include a higher percentage of bonds and cash. This can lower the overall risk in your portfolio and allow you to plan for retirement.
To learn more about portfolio rebalancing and why it matters, click here to talk to one of wealth management experts.
Helps Control Costs
Every investor must make it a priority to control their costs. For instance, if you are opting for margin investing, then you need to make sure the rate of return on a security exceeds your cost of borrowing. There are other costs to account for, as well. If you are using active management strategies, then this will automatically increase your costs and reduce the efficiency of your portfolio. In contrast, passive management is most cost-efficient.
Having a strategy for investment management that ensures cost control can help you out here. It allows you to grow your wealth and provides a healthy cash flow that gets you one step closer to your financial goals.
If your current financial advisor doesn’t emphasize on cost control as much as they should, then you should consider making a change. Click here to read our guide on how to select the right financial advisor for wealth management.
What Can We Offer to Investors Seeking Wealth Management Hawaii?
Strategy is an integral part of investment management and wealth management, Hawaii. Be it a defensive equity strategy or a core equity strategy, you need to make sure your investment portfolio is designed to enhance your returns, reduce your risk, and control your costs.
At Pillar Wealth Management, we deliver all that and more. Our comprehensive approach to wealth management allows our clients to improve portfolio performance, accumulate wealth, and pursue the lifestyle they desire. To learn more about our investment management strategies,
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