A Little Planning Goes A Long Way: Three Key Investment/Wealth Strategies For 2023/2024

Anyone who has investable assets require the use of complex financial planning strategies, and because of the complexity piece, it can be easy to “set and forget” them once they’re in place. But no financial strategy should be left in motion without review and active management. You need to make sure they’re still working for you.

Here are three simple, but effective strategies to consider as we head into 2023.

1. Stay invested according to your long-term goals.

Right now, there are many portfolio returns in that not-so-bright, holiday red, with percentage losses well into the double digits. The past year was challenging for the financial markets, and now inflation is soaring, and interest rates are rising.

This may be enough to turn you away from making changes to your current investment strategy, and that’s not necessarily a bad thing, but for anyone who is currently “sitting in cash,” you may end up finding yourself in a more precarious position than had you stayed with your investment strategy. Investing is a long-term game, and when the markets turn, the reward can make holding your strategic patience worth it during periods of downturn.

Look at it this way. With an initial investment of only $10,000, a study by Fidelity Investments found that over 40 years, missing just five of the best market days could cause an investor to lose out on over $265,000 in returns. While trying to “time the market” is a fool’s errand, to ensure you do not miss the market’s best days, it’s best to maintain your portfolio according to your long-term investment plan.

2. Diversify your portfolio with alternative investments.

Investors should consider diversifying their holdings among more than just the traditional asset classes. The alternative investments category covers any investment that is not the conventional cash and cash equivalents, publicly traded equities, or fixed income investments. It includes private equity, private credit, real estate, and hedge funds. These assets have a risk and return profile that differs from your conventional ones, allowing for enhanced diversification.

Many private investments and hedge funds are offered under prospectus-exempt rules, requiring the purchaser to qualify as an accredited investor. Your net worth will determine if you are accredited, allowing you the opportunity to purchase these securities. While all investors can access alternative investments, medium and high net worth investors can buy a more comprehensive array of products than the average investor.

Whether you purchase alternatives as an accredited investor or through a product accessible to all, the asset class can offer significant benefits for your portfolio. These investments tend to be uncorrelated with traditional assets, so they can help prop up portfolio returns during times of economic uncertainty, including when the stock market is underperforming. With a separate return profile, alternatives decrease overall volatility and boost the risk-adjusted returns over time.

3. Consider insurance as an investment.

Insurance is often believed to cover your financial obligations “just in case.” This is just one use, though. Instead of buying insurance in a traditional sense, individuals can consider purchasing an insurance policy as an investment tool to help maximize the size of their estate.

For example, one way to implement this is through a whole life (WL) policy, where the beneficiary receives a payout upon the insured’s death. With this type of permanent insurance, the death benefit can be used to increase the financial legacy of the deceased, and the proceeds can cover any taxes owed by the estate. These final taxes can be significant and may erode the value of their estate, especially if they do not strategize ahead of time and plan accordingly.

This example of whole life insurance is just one of many ways to maximize wealth using insurance. The ideal strategy is highly personal and dependent upon your personal and financial goals, so consider working with a trusted insurance professional to ensure you optimally implement the “insurance as an investment” approach.

Start the new year off right by having your financials ready, revised if needed, and working for you. Planning ahead and implementing wealth strategies to meet your financial goals can do wonders for your portfolio. A little planning goes a long way when it comes to growing and protecting your wealth. Then you can start to invest, then rest!