High net worth investors face investment challenges that some would consider unique to their financial status. The fundamental tenets of investing apply just as equally to them as any other investor, but these investors need to be mindful of issues that typically arise only from substantial wealth.
Let’s examine a few of these.
When an individual has more assets than they think they may ever spend, there can be a tendency toward overly conservative investment. This may result in lower long-term returns, which may shortchange the impact of bequests to charities or the wealth that will transfer to the next generation.
The affluent have a tendency to invest in their passions, and many collectibles have performed well over the years. One common mistake, however, is not keeping up-to-date appraisals, which may have adverse consequences with regard to estate liquidity and taxes. An investor should also remember that a variety of factors can significantly affect the value of collectibles by, including economic downturns or markets that have little or no liquidity. Therefore, there is no guarantee that collectibles will maintain their value (or effective purchasing power) in the future.
Some senior executives accumulate large stock positions in the company that employs them. A general rule of thumb is that any position making up more than 10% of a portfolio should be reviewed for appropriateness. Not every concentrated position needs to be sold, however. Indeed, it may be possible for a client to continue to hold a sizable amount of one stock if their portfolio also has a solid foundation of well-diversified investments to help pursue their goals. Keep in mind that the return and principal value of stock prices will fluctuate as market conditions change and that shares could be worth more or less than their original cost when sold.
Some wealthy investors have achieve great career or business success due to their intelligence, initiative, and self-confidence. This very success often promotes the belief that building or managing successful enterprises is not dissimilar to managing great wealth. In fact, it can be quite different, requiring a whole different body of knowledge and experience. An investor might be surprised how the company they invest in actually makes money.
Affluent investors often place their invested assets with multiple investment professionals, presuming this may lead to better performance. Many of the key needs of larger portfolios, such as risk and tax management, could suffer as a consequence. This may occur because an investment professional supervising only some of the assets would lack an overarching view into the larger picture of an individual’s entire portfolio. The independent actions by separate investment managers, all with the best of intentions, may actually encourage suboptimal outcomes.
With increasing wealth comes even more unique challenges, beyond those covered by this discussion. Consequently, we encourage affluent investors to seek professional guidance from a certified financial planner that may be best suited for their particular needs and circumstances.
What is a 1099 form? This is a record of payment from an individual or entity, showing a payment, generated for your records. The individual/entity sends a copy to both the payee as well as the I.R.S.1 Who might be sending 1099s? Clients send their contractors 1099s, recording work performed. Banks send 1099s to reflect … Continue reading “1099 Form Help”
When you think about your estate, you may think about your personal property, real estate, or investments. You also have other, less-tangible assets – and they deserve your attention as well. We consider these your digital assets. A digital footprint of your life – and you need to consider them within your estate planning.
Pursuing your retirement dreams is challenging enough without making some common, and very avoidable, mistakes. Here are eight big mistakes to steer clear of, if possible. No Strategy. Yes, the biggest mistake is having no strategy at all. Without a strategy, you may have no goals, leaving you no way of knowing how you’ll get … Continue reading “Eight Retirement Mistakes to Avoid”
When you lose a spouse, partner, or parent, the grief can be overwhelming. In the midst of that grief, life goes on. There are arrangements to be made, things to be taken care of – and in recognition of this reality, here is a checklist that you may find useful at such a time. If … Continue reading “Estate Planning Checklist for When a Spouse or Parent Passes”
The first week of 2021 has already had many ups and downs. Just because it’s a new year doesn’t mean that the 2020 issues go away, and so far, 2021 has been no exception to this rule. The markets opened on January 4 and traded lower out of the gate, with the S&P 500 dropping … Continue reading “2021 Opens With a Bang”
Epic Capital provides the following comprehensive financial planning and investment management services: Learn More >