• 5 things the ultra-wealthy are doing to prepare their portfolios for a

    From a425couple@21:1/5 to All on Wed Sep 18 06:55:42 2019
    XPost: or.politics, alt.economics, alt.politics.economics

    from https://www.businessinsider.com/how-ultra-wealthy-prepare-for-recession-preparation-portfolio-2019-9

    (Sounds like trying to time the market to me!)

    5 things the ultra-wealthy are doing to prepare their portfolios for a
    possible recession, from ditching bonds to stockpiling cash
    Taylor Nicole Rogers 19h

    upset nyse trader
    A recession may be imminent, and the ultra-wealthy are taking notice. REUTERS/Brendan McDermid

    Some economic indicators are warning that a recession may be imminent.
    Though many financial planners advise not altering your portfolio in
    reaction to the market, some high-net-worth people are shifting their
    fortunes from bonds and into cash to reduce their risk.
    Business Insider spoke with five certified financial planners around the
    US to find out how the ultra-wealthy are preparing for the possibility
    of a recession.
    Financial planners for the ultra-wealthy are advising their clients to
    reduce their debt in preparation for a market slowdown.
    Visit Business Insider's homepage for more stories.
    A recession may be imminent, and the ultra-wealthy are taking notice.

    Many are rearranging their portfolios in an effort to protect their
    fortunes, a group of certified financial planners told Business Insider.

    Their strategies vary from person to person based on their risk
    tolerance, Ashley Folkes, a certified financial planner and senior vice president of Moors & Cabot, an Arizona wealth-management firm, told
    Business Insider.

    Folkes said that "over the years working with high-net-worth clients,"
    he had seen "a tendency to protect and then grow their wealth."

    "We discuss how much undue risk you are wanting and willing to take in
    order to satisfy your goals," Folkes said. "Currently, I'm seeing the conversations with investors shifting to a slightly more defensive stance."

    Read more: Billionaires tend to make riskier investment choices than millionaires, and it helps explain why ultra-high-net-worth individuals
    lost so much of their money in 2018

    Older ultra-wealthy Americans are the most anxious to modify their
    portfolios in anticipation of a market correction, Ben Smith, a
    certified financial planner with Cove Planning in Wisconsin, told
    Business Insider.

    "We have explored moving into high-quality fixed income and even
    alternatives in order to provide ballast in a volatile equity market,"
    Smith said.

    Here are five things the ultra-wealthy are doing to prepare for a
    recession, according to their financial planners.

    1. Wealthy investors are ditching bonds
    Short-term bonds have offered investors higher returns than their
    long-term counterparts since the yield curve inverted in August,
    Business Insider previously reported.

    But an inverted bond yield curve isn't just an important indicator of a shrinking economy, according to Steven Kaye, a certified financial
    planner and the CEO of AEPG Wealth Strategies in Warren, New Jersey.

    "Bonds offer little value currently, except for portfolio ballast," Kaye
    told Business Insider.

    Reducing clients' exposure to bonds also reduces their exposure to
    fluctuations in interest rates and the overall market, Kaye said — two
    things that would be abundant in a recession.

    Read more: The yield curve is inverted. Here's what that means, and what
    the implications are for the economy.

    2. Instead, they're stockpiling cash to maintain their liquidity
    Moving one's fortune to cash is a popular way to ensure it outlasts a recession, according to Samuel Boyd, a certified financial planner and
    the senior vice president of Capital Asset Management in Washington, DC.

    "The key to surviving, and thriving, in any recession is access to
    liquidity," Boyd said. "As the old saying goes, 'cash is king,' and it
    can mitigate portfolio risk as well provide a fulcrum to capture
    opportunities when the world is on sale."

    The billionaire hedge-fund manager Sam Zell of Equity Group Investments
    is also shifting the assets under his management into cash, he told CNBC earlier this month.

    "We certainly never had a cash position like we have now," Zell said. "I
    think we're very reticent about the opportunity. We think there's going
    to be some significant opportunities, but what we don't see is the urgency."

    3. The 1% are embracing ETFs to shield their wealth from unnecessary risk
    For high-net-worth people, exchange-traded funds provide a lower-risk
    way to stay in the market amid increased volatility among equities.

    "If you want to stay invested in equities until there is a stronger feel
    for a recession, then you could shift to index ETFs, to index low
    volatility ETFs," Folkes told Business Insider.

    Folkes also recommended that those looking to mitigate their risk invest
    in dividend-paying stocks with long histories.

    "Shift more to high-quality dividend-paying companies that have shown historically they can handle prolonged periods of weakness in the market
    by having low debt and solid balance sheets," Folkes said.

    4. They are paying down any debts
    Even high-net-worth people who haven't reallocated their portfolios in anticipation of a market correction are looking to refinance and pay off
    their debts while interest rates remain relatively low, Jared Friedman,
    a certified financial planner with Redwood Planning in New Jersey, told Business Insider.

    "Clients are asking about it and discussing it more but have not made
    any allocation changes at this time," Friedman said. "We are trying to proactively pay down any extra debt and save more money."

    5. The best thing the ultra-wealthy can do is stop trying to game the market Ultimately, though, the best thing nervous high-net-worth investors can
    do for their portfolios may be nothing at all, Smith told Business Insider.

    "I have received a few questions from these clients about their current allocation and how different market scenarios will impact potential
    returns," Smith said. "I reiterate that their risk tolerance, asset
    allocation, and ultimately their portfolio mix reflects a potential
    recession in the markets, and the most important thing they can do in
    order to maximize the probability of reaching long-term goals is to
    stick with their plan and don't give in to emotions."

    SEE ALSO: What the world's richest people look for when they choose
    their wealth managers
    DON'T MISS: Why Elizabeth Warren and billionaires like George Soros
    alike are calling for a specialized tax on the ultra-wealthy
    More: BI Select Arts & Culture Billionaires Personal Finance

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