Investing – 3 Rules From a High Net-Worth Wealth Manager

Investing – 3 Rules From a High Net-Worth Wealth Manager

As high-net worth wealth advisors, a key question we’re often asked by clients is how best to invest individual or family wealth.

In the era of FOMO investing, and stories of overnight crypto millionaires, it is easy to get caught up in thinking there is a “secret sauce” to investing. However, no one can predict the markets (regardless of how often they tell you that they can) and timing the market is not a strategy unfortunately.

Over the years, we have seen time and again that the best way to ensure your ability to invest in risky assets that will go up or down – as bonds and equities inevitably do – is to:

1. Keep it simple
2. Build a safety net
3. Focus on long-term wealth investment strategies

Following these three general rules will help create a structured safety net, which you can then use as a foundation to build sensible market investments that generate income, deliver returns and build capital.

Keep it Simple

The truth is, we can deep-dive into never ending thoughts and theses on technical asset allocation models, but the reality is that most people do not fit well into technical models over their lifetimes. The models are not well suited to adapt to real people and families and the ever-changing circumstances of life.

At Bentley Reid, we have always taken a very holistic stance when looking at personal wealth and, regardless of wealth levels, we aim to keep it simple.

Life is already complicated enough – your investments don’t have to be too.

Build a Safety Net

To invest in anything – from bonds to equities to riskier assets – where performance is not guaranteed, especially over the shorter term, it is paramount to have enough cash to allow you to ride out the inevitable market waves.

These cash needs can be limited to one or two years of income spend, or perhaps much larger depending on age and circumstance. Having a cash pot allows you to build allocations into bonds, equities or other investments, but ensures that you can avoid becoming a forced seller at inopportune market times (should the market fall) because you need to get cash to fund your lifestyle.

Being forced to raise cash from investments during periods of market drawdowns can often represent permanent loss of capital. This is the real destruction of family wealth rather than the periodic ups and inevitable downs of investment markets. This sensible cash safety net allows you to stay invested even during major market corrections (such as the Global Financial Crisis of 2008 or dotcom bubble).

Invest Sensibly for Long-Term Wealth

Timing the market to sell at market peaks, and buy again at troughs, is not something many people get right – and certainly not repeatedly. It is much easier to periodically trim back investments that have done well to rebuild cash if needed.

The great thing is, these days, cash and high-grade fixed income earn positive real returns, so you get paid to own cash and low risk fixed income. A simple rule of thumb: in general, bonds will outperform cash and equity markets will outperform bonds over the longer term. So, start there.

Beyond public market equites there is private equity, venture capital and a whole deeper spectrum of investment opportunities – most of which often come with some illiquidity or lock up period where you cannot access your capital. These investments may be suitable, and can generate larger returns, but – in general – getting the cash, bond and equity pots built in a sensible way first allows you diversify up the risk curve as you build wealth.

Holistic Wealth Management Matters

Simplifying your approach to investments can be easier said than done. We are strong believers that a personal, service-led approach to financial planning makes a difference – and investment management is just one piece of the holistic strategy for those looking to build long-term wealth.

To find out more about Bentley Reid visit https://www.bentleyreid.com/