Robert Borden Delegate Advisors
Strong investment portfolios incorporate a great degree of diversification to mitigate risk. Diversification generally means investment in riskier vehicles, such as stocks, as well as more reliable options, such as bonds. Stocks represent an ownership stake in a business. Thus, as the business increases in value, the worth of the stock climbs. The potential for gain is virtually limitless. From the counter perspective, however, the potential for loss is also great. If the business does not perform well, the value of the stock plummets. On the other hand, bonds act as a sort of “I.O.U.” from the business. A bond states that the business will pay back the amount lent plus a set amount of interest. Thus, while bonds have less risk associated with them than stocks, the returns also prove smaller. Stocks, or equities, play an important role in the portfolio of any serious investor, since they have a higher potential for growth than other asset classes. Investors tend to become suspicious of stocks when other asset classes outperform them, and may pull out in favor of more stable investments. To focus only on bonds, however, severely limits the earnings potential of a portfolio. At the same time, even investors willing to accept a very high level of risk should not invest solely in stocks.
If you are thinking of purchasing a new life insurance policy to protect your family, you will need to understand the difference between term and whole life policies and the advantages and drawbacks of each. Term policies offer very affordable options to protect you for a specified and limited period of time, ranging anywhere from five to 30 years. A whole life policy, on the other hand, is a long-term, wealth-building investment that provides protection for your entire life span. In addition, a whole life insurance policy offers you cash value and the option of borrowing against it to pay for a child’s or grandchild’s education or your own retirement. Unlike the premiums for a typical term policy, a whole life policy’s premiums do not go up as you age. However, a term policy is typically cheaper to fund and often requires no medical evaluation. In both types of insurance policies, you own the policy, regardless of how your employment situation or pension plan may change. Among the chief disadvantages of a term policy, however, is the fact that its coverage ends with its expiry date and that its cash value does not increase. Your whole life policy can be a significant part of your investment portfolio, and a term policy can offer you supplemental insurance in addition to your major policy should you consider yourself underinsured.
The issues that high-net-worth individuals and families face when putting together an estate plan go beyond those encountered by people with moderate incomes. The higher a family’s level of liquid assets, the greater the chance that investments, assets, and family members themselves exhibit a high degree of mobility across borders and tax jurisdictions. Additionally, members of this distinct group often provide substantial support to many other adults throughout their extended family. The specific challenges any high-net-worth group may face depend on the nationality of the individuals involved, as well as the locations of financial and other assets. Such individuals and families may also desire that the disposition of their estate provide a legacy not only to future generations of heirs, but to society as a whole. A high-net-worth individual is often defined as someone in possession of more than $1 million in liquid assets. A net worth of $5 million puts an individual in the “very high net worth” category, and those with liquid assets totaling $50 million or more are often characterized as “ultra-high net worth.” The higher the net worth, the more likely a person is to require a superior level and quality of professional planning, investment, and tax assistance. While most wealthy individuals feel that they have established appropriate plans for their own retirement, more than 70 percent do not have a current estate plan comprehensive enough to address all of their family’s needs. A financial planner experienced in working with clients of high net worth can assist in creating a plan to address a variety of post-retirement concerns, including long-term health care, taxation, charitable giving, and estate planning.
Hedge funds are partnerships between a fund manager and the individuals who invest in the fund. The manager takes the money provided by investors and makes investments according to the accepted strategy of the hedge fund. Ultimately, managers seek to maximize return while minimizing risk. Hedge funds generally aim to make money despite the regular fluctuations in the market. To accomplish this goal, managers go long when the market climbs and sell short when the market declines. Most hedge funds have a minimum net worth for investors to qualify. The exact fee structure varies according to the fund and strategy, but the common structure is called “two and twenty,” meaning a 2 percent asset management fee and a 20 percent fee on gains generated by the manager. When individuals have the resources to invest in a hedge fund, this option provides a number of benefits. Hedge funds have balanced portfolios that significantly cut risk and can generate returns in both rising and falling markets. Many funds allow investors to customize the investment strategy while benefiting from the experience of seasoned managers.