Investors with a high net worth have a variety of advantages that ordinary investors simply cannot match, from world-class financial advisors to the best tax professionals money can buy. Those with a high net worth want to keep as much of their hard-earned money as possible and continue to grow that wealth over time.
As the saying goes, however, more money, more problems. High-net-worth individuals can easily find themselves being preyed upon by those who would seek to separate a fool from his money. If they can successfully navigate the shark-filled waters, however, they can grow their wealth using tried and true strategies.
Anyone that’s even casually read Motley Fool Stock Advisor reviews or similar financial publications knows that diversification is the cornerstone of successful investing.
Dividing up your assets among various investments is the safest way to guard against a catastrophic event. For high-net-worth individuals, diversification doesn’t just mean diversifying their stock portfolio. While impersonal investment advice may apply to the masses, high-net-worth individuals often have different goals from the rest of us.
For someone with a high net worth, diversification can take many forms, such as:
- Owning real estate in various markets to minimize volatility
- Investing in foreign currencies and corporations to safeguard against downturns on the home front
- Investing in private corporations through partnerships with venture capital firms
- Investing in non-traditional acquisitions, such as fine art or antiquities
The goal isn’t always to make more money. Most of the time, for high-net-worth individuals whose personal net worth may fluctuate wildly based on the whims of the stock market, the goal is simply to retain as much of their wealth as possible and not see it erode over time.
Another goal is to make sure that future generations have access to the wealth that has accumulated over a person’s lifetime. Both of these strategies can be achieved by maintaining investments with favorable tax statuses.
Things such as bonds and blue chip companies that pay high dividends are a great way to ensure that the money keeps flowing while tax burdens are minimized. People with large sums of money can also establish trusts and other legal frameworks to help ensure that future generations aren’t unduly burdened by taxes.
For those who can legally give investment advice, a primary duty is to always act in the best interests of their clients. This means ensuring that there are robust risk management strategies in place.
Risk management isn’t just about trying to foresee calamities before they happen–it also means diversification and ensuring investments are closely watched for signs of trouble that may be brewing.
It also involves keeping an eye out for shady individuals and companies who would love nothing more than to get a piece of the pie for themselves, leaving behind a trail of financial destruction in their wake. One way to do this is to hire third-party auditors and advisors to oversee new investments and ensure everything is above board.
Putting the Pieces Together
By practicing the tenets we mentioned above, many high-net-worth individuals find themselves with a growing net worth and an ever-diversifying portfolio of investments. With these pieces in place, they can remain wealthy and provide for future generations.