{"id":101896,"date":"2022-10-03t11:00:55","date_gmt":"2022-10-03t15:00:55","guid":{"rendered":"\/\/www.g005e.com\/?p=101896"},"modified":"2022-12-22t00:39:22","modified_gmt":"2022-12-22t05:39:22","slug":"diversify-for-greater-wealth","status":"publish","type":"post","link":"\/\/www.g005e.com\/2022\/10\/03\/diversify-for-greater-wealth\/","title":{"rendered":"your client’s instincts are wrong"},"content":{"rendered":"

\"dollar<\/a>how you as the personal cfo can help.<\/strong><\/p>\n

by anthony glomski<\/i><\/p>\n

let\u2019s examine in detail some key drivers of investment success:<\/p>\n

    \n
  1. diversification can provide a smoother investment journey \u2013 and greater
    \nwealth.<\/li>\n
  2. global exposure adds value.<\/li>\n
  3. diversity with fixed income.<\/li>\n
  4. control what you can control.<\/li>\n<\/ol>\n

    more: <\/b>when clients don\u2019t listen<\/a> | what clients need to know<\/a> | what level of advice do entrepreneurs need?<\/a> | three components of collaborative wealth management<\/a>
    \n\"goprocpa.com\"exclusively for pro members. <\/span><\/strong>    log in here<\/a> or 2022世界杯足球排名 today<\/a>.<\/span><\/p><\/blockquote>\n

    andrew carnegie\u2019s advice for growing assets \u2013 put all your eggs in one basket and watch the basket \u2013 is sage wisdom when it comes to building a great enterprise. that strategy has worked for you as an entrepreneur, and it\u2019s likely why your clients are successful, too
    \n
    \nsuccessful investing is an entirely different story, however \u2013 one in which diversification is the key to growing (and more important, keeping) your money. contrary to andrew carnegie\u2019s advice, we all know the basic, almost clich\u00e9 idea behind diversification: don\u2019t<\/strong> put all your eggs in one basket.<\/p>\n

    and yet, too many investors \u2013 especially entrepreneurs \u2013 invest too much of their wealth in any number of non-diversified ways. some of the most common, and potentially wealth-threatening, include:<\/p>\n

      \n
    1. owning too much of any one single stock (i.e., overly concentrated)<\/li>\n
    2. owning too much of any one single asset class, such as stocks or alternatives<\/li>\n
    3. owning too many stocks from one single industry, sector or country<\/li>\n<\/ol>\n

      sound familiar?<\/p>\n\n\n\n
      dealing with concentrated stock<\/strong><\/center>
      \nso-called concentrated stock positions are particularly common among business owners after they\u2019ve had a liquidity event. that\u2019s often when they have received a large amount of stock of the company (or companies) that acquired their enterprise. in such situations, there are two main tasks for the successful entrepreneur:<\/p>\n
        \n
      1. reducing their overall portfolio\u2019s allocation to stocks<\/li>\n
      2. reducing their single-stock exposure and the company-specific risk that accompanies it<\/li>\n<\/ol>\n

        a plan should be developed to diversify into other asset classes as well as into other categories of equities.<\/p>\n

        often, the best approach for dealing with an oversized position in one stock is one or a combination of the following strategies:<\/p>\n

          \n
        1. fixed selling program.<\/strong> this commonly used approach involves the scheduled selling of fixed amounts of stock at regular intervals, and it can be customized by time and quantity.<\/li>\n
        2. custom scale-out strategy.<\/strong> this involves capping a concentrated stock position at a fixed percentage of household wealth and selling a portion of the position to trim it back as higher prices are achieved. with this approach, your client will always maintain a core position in the stock \u2013 a potential benefit if the stock posts strong multiyear gains.<\/li>\n
        3. using options<\/strong> to protect downside or realized upside at certain price targets. options can be bought individually (i.e., a protective put or hedge against a drop in the price of a certain security), or can be used in combination (i.e., \u201ccollaring\u201d). although the complexities and tax implications increase with this strategy, options are an excellent way to assist a selling program.<\/li>\n
        4. using algorithms. <\/strong>market timing risk can be reduced, and market impact minimized, when selling large blocks of stock by using algorithmic programs. simply put, an average price over a specified period (a full trading day) can be targeted, monitored through the day and realized as a single trade.<\/li>\n<\/ol>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

          in all the above scenarios, the investors are taking on far more risk than is prudent. it is simply unnecessary to incur the full volatility of a single asset class, like stocks. the marginal benefit from doing so (in the form of higher return) is not commensurate with the amount of risk taken \u2013 risk that can threaten the preservation of your client\u2019s wealth.<\/p>\n

          no one can say what will happen today, tomorrow or next month with absolute certainty. unexpected developments such as sept. 11, the global financial crisis and the covid-19 pandemic will always occur that can affect your investments in ways you might never anticipate.<\/p>\n

          therefore, it\u2019s impossible to know precisely when a stock, asset class or industry will outrun all the others \u2013 and when it will find itself languishing at the back of the pack. in fact, financial science tells us that an asset class that soars in one year rarely finds itself at the top of the pack the following year. likewise, a \u201closer\u201d asset class one year often catapults to the winner\u2019s circle the next year.<\/p>\n

          the lesson that financial science teaches us is clear: if you want to own winning investments consistently over time, you can\u2019t just invest in one or two stocks, sectors or even broad asset classes.<\/strong> you need to own many of them at all times \u2013 regardless of how they perform in any single year. that way, you will always be invested in enough areas of the market that are doing relatively well at any given moment.<\/p>\n

          diversifying your portfolio will also ensure that you don\u2019t put too much of your money in the wrong areas of the market and end up watching your net worth plummet. with diversification, your portfolio is far less likely to experience wild swings in value the way a highly focused or highly concentrated portfolio does.<\/p>\n

          global exposure adds value<\/strong><\/p>\n

          during the so-called \u201clost decade\u201d of 2000-2009, the s&p 500 delivered a cumulative total return of minus<\/strong> 9.1 percent. add in the volatility of two sizable bear markets during that time, and nobody remembers that period too fondly.<\/p>\n

          interestingly, however, other asset classes fared much better than large-cap u.s. stocks over the same dark period:<\/p>\n