A Good Wealth Management Rule of Thumb: Do the
Opposite of What Everyone Else is Doing.
Given recent market conditions, including currency and stock fluctuations, political uncertainty, rising unemployment and inflation, and omnipresent play-by-play media coverage, it is no wonder that Americans feel pessimistic about the economy. Regardless of market conditions, we advise clients to take a long-term approach to wealth management. A long-term approach should include (1) diversifying your investments and (2) consistently re-balancing assets based on changing opportunities and risks.
Diversify your investments. You're thinking stocks and bonds. It's natural. We have been trained. Large cap versus mid cap versus small cap stocks. Domestic versus international stocks. Growth versus value stocks. Index versus actively managed mutual funds. Equity versus debt securities. No matter what the asset allocation, a portfolio too heavily yoked with these traditional securities is poorly diversified. The reason is simple: they represent only a small portion of the myriad opportunities available to the average investor - opportunities that provide valuable hedges against fluctuations in mainstream securities. So, you're asking, what else is out there?
We work with numerous investment instruments and opportunities that help our clients properly diversify their portfolios. We typically start with real estate. Over the long term, a primary home is the best investment you'll ever make. Income-producing real estate investments are another tremendous tool that provide the ability to leverage your income, reduce tax liability, and generate wealth passively. From there, we recommend that people consider investing in themselves in the form of education and small business ownership. We can help there. Finally, we work with numerous other private investments that yield sustainable returns for the average person trying to properly diversify his or her portfolio.
Consistently re-balance your assets based on changing opportunities and risk. Your risk profile changes with age and circumstances. Your investment portfolio should change accordingly. The challenge here is to avoid the common mistake of investing counter-intuitively. Don't sell when your investments are down (or buy when the market is up)! Today's real estate market is a great example. It's an incredible buyer's market today but most buyers are scared stiff, worried that we haven't hit rock bottom yet. If you have a long-term perspective, however, you will start to see great opportunities created by the collective chaos. A good rule of thumb is simply to do the opposite of what everyone else is doing!
The Payne Smoot Group is Utah’s premier real estate, wealth and property management firm. For more information on the Group’s holding companies, investment or employment opportunities, please contact (801) 717-7777 or info@paynesmoot.com.
