Shift from wealth creation to wealth preservation

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When I talk to clients, two of the basic questions I ask are: “What is your attitude towards risk?” And “What are your goals for retirement?” “

Building an investment portfolio that is perfectly tailored to the client and easily adaptable at each stage of their life is essential to guarantee the best financial results. A more difficult question to answer is, “When should I switch from creating wealth to preserving wealth?”

What is the creation of wealth?

Wealth creation is the constant accumulation of income and assets over time. Growing wealth requires you to identify your financial and life goals and these should cover the short term (1-5 years), medium term (5-10 years) and long term (10+ years). Goals may include home ownership, funding for private or university education, saving for retirement. Having a clear prioritization of your goals will help inform your wealth building strategy.

Then you need to plan – budget for your monthly expenses and include your savings and investments in the budget. The accumulation of wealth in the medium and long term requires investing beyond basic bank savings accounts. This means that you need to understand your attitude to risk so that you can develop wealth building strategies that match your risk appetite as well as your goals.

Finally, successful wealth creation requires good asset allocation. It all depends on where you place your investments – bonds, stocks, real estate, etc. For example, it is commonly believed that you should only invest in stocks if you can invest for the medium term of at least five years. This is how you can afford to stay in the market when the market is going through a period of volatility. It is advisable to have the help of a professional wealth manager to thoroughly evaluate all the options in order to find the best combination of investments for you.

What is heritage preservation?

Preservation of wealth is the maintenance of your income and assets. This can be difficult as many people tend to be passive about preserving their wealth. It can be difficult to preserve your wealth when the markets are volatile. As you move into retirement, most clients’ attitudes to risk change. Having high-risk investments later in life puts you at risk of losing some or all of your accumulated wealth, forcing you to struggle for retirement. Diversifying your portfolio allows you to continue to ensure good growth while adopting a prudent approach to risk that ensures you maintain your wealth. Asset allocation should be regularly reviewed as the client ages and their personal circumstances change.

In addition to changing your investment strategy, having insurance and a 3-6 month “rainy day” emergency fund for living expenses are also good options for heritage preservation. Protection policies allow you to insure your income against inability to work in the event of illness, and critical illness insurance policies can reduce the financial strain if you are diagnosed with an illness such as heart attack, cancer, or cancer. stroke. These insurances help prevent your wealth from eroding if life doesn’t go as planned.

How do you decide when to change your strategy?

The answer to this question is, of course, complicated and depends entirely on the individual’s circumstances, attitude towards risk and financial goals. But, to generalize, wealth managers tend to begin to consider a wealth preservation approach more when clients turn 50, assuming retirement around 60-65. At this point, asset allocation may start to shift from higher risk, like emerging market equities, to less risky assets like government or corporate bonds. Once retirement is over, the portfolio should provide regular monthly income to enable the client to maintain their standard of living, which will require additional changes to further reduce exposure to equities and increase the amounts held in income instruments and cash.

Advice from Blacktower Financial Management

The investment choices are limitless, but it can be overwhelming. Blacktower Financial Management’s wealth advisers can assess your situation and help you identify the best way to structure your wealth to grow and preserve your wealth. We will regularly review your position to ensure that you are meeting your financial goals now and in the future. Contact one of our Lisbon office representatives today for your free, no-obligation discussion.

Black tower in Portugal

Blacktower’s offices in Portugal can help you manage your wealth to your best advantage. For more information, contact your local office.

Antonio Rosa is the associate director of Blacktower in Lisbon, Portugal.

Blacktower Financial Management has been providing specialist and localized wealth management advice in Portugal for 20 years. We can help you with expert, independent advice on securing your financial future. Contact us on (+351) 214 648 220 or email us at [email protected]

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