After the financial crisis, many Americans re-examined how and why they were investing. It was clear to many investors that have all of their wealth tied to the stock market proved to be more destructive than having alternative investments. This period was unfortunate if an investor needed to liquidate their investments during a low-valuation period and were only invested in intangible investments in the public markets. However, there were investors, the High Net worth (HNW) investors, which fared better than the others. In this article, we examine a wealth preservation technique utilized by many portfolios.
After 2008, investors started seeking opportunities in alternative investments to ensure wealth preservation. Today wealth preservation desire is revitalized. This desire is caused by the volatility in equities and commodities investments.
There isn’t any secret that only HNW investors know to guarantee a high return, but there are common avoidances they generally adhere to. When they invest, they look for alternative investments that don’t fluctuate during market instability and invest to preserve their wealth for the next generations that follow. What investments do they make in addition to investing in the public markets? tangible investments; for example:
Precious metals are desirable to manufacturers and government entities. The investment may be in the mining opportunity, distribution of the asset, or some other aspect of the purchasing or development and liquidation of the metal.
When it comes to real estate, HNW investors think bigger, globally, and look for real estate that doesn’t come on the market often. Private residences/estates, commercial property, and property outside of their geographic area allow for steady appreciation over time. They look at real estate for long-term investing with monthly income and liquidation opportunities, potentially years later.
Investors in this asset area know the value of what they own and understand that ‘limited supply’ can make them money. Owning art and collectibles the public is aware of can potentially create a larger return.
Alternative investments may be exclusive to the threshold amount of the investment and may not be appropriate for all investors. Furthermore, investors choosing to invest in alternative investments must be educated on the risks before investing. Lastly, all investors, including HNW investors and those seeking alternative investments, should avoid the following mistakes:
Additional Disclosure: These are the opinions of the author and not necessarily those of the Registered Investment Adviser or Broker/Dealer, are for informational purposes only, and should not be construed or acted upon as individualized investment advice.
As a retirement income specialist and 38-year veteran of the financial services industry, August H. Velten understands what his clients need in order to enjoy a comfortable retirement. Augie is a former instructor for the Life Underwriter Training Council and once occupied the legislative seat for the Maine Association of Life Insurers. At August H Velten & Associates, we know that it is your retirement, and you should have control over it. We offer our experience and knowledge to help you design a custom strategy for financial independence. Contact us today to schedule an introductory meeting!