Whenever a wealth management planning services provider works with a client, developing a resilient plan is one of the main goals. How do you determine if your plan is resilient or fragile, though? Take a look at your wealth management planning efforts through these four filters to figure out where you might need to shore up some weaknesses.
If you're not reviewing your plan at least once a year, that's already a potential sign of trouble. You need to be able to adapt as markets change, investments pay off or fail, and your financial needs evolve. Even if your current wealth plan seems to be flying on autopilot, you need to schedule an annual review to make sure everything is on track to hit or exceed your targets.
As a wealth plan moves forward, you will want to diversify your holdings to ensure you don't have too much exposure to one potential shock. If you've invested heavily in the stock market, for example, there is a risk that general shocks can do significant damage to your holdings. Adding some investments in treasuries, municipal bonds, real estate, precious metals, and other holdings can ensure you don't expose your wealth to a risk of collapse if one asset class collapses.
Similarly, you will find that some asset classes outperform or underperform over time. This is normal, but you don't want it to become a threat to your diversification. Someone who invested a moderate amount in cryptocurrencies a decade ago, for example, would have a very unbalanced portfolio today if they made no adjustments. Consequently, their wealth will be noticeably exposed to shocks in what is a very volatile sector.
You should recalibrate your portfolio overtime to maintain balance. Banking profits, from a more aggressive asset class, offer you an opportunity to put money into a more stable class. For example, you might move some profits from speculative securities into real estate to flatten your exposure.
Hedging is a wealth management planning idea that is simple in concept but challenging in practice. You want to find small investments that run counter to the cycles of your main ones. If you've bought heavily into commodities during a run-up, for example, you might want to purchase a small collection of options to cover the possibility of a price collapse. Similarly, many people with inflation exposure invest in precious metals. You should talk with a wealth management planning services professional to make sure your hedged positions are always providing sufficient insurance against potential shocks.Share
3 February 2022
I still remember the day that my wife and I bought our first home. We were excited about filling the place with new furniture and looking for great area rugs. Unfortunately, before we knew it, we found ourselves deeply in debt. It was difficult to dig our way out, but over the course of the next several years, we were able to make things right. I want to teach other people how to manage finances so that they can avoid the turmoil that we went through. Financial planning might seem impossible, but with a little practice, I know it can become second-nature.