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Wealth Preservation Strategies for Your Portfolio: A Guide

Preserving wealth is a very different strategy than creating it. When you’re young, starting your career, and trying to save for retirement, your investment strategy is more than likely focused on growth. You have plenty of time before retirement, so you’re comfortable taking on bigger risks. That might mean investing in growth stocks, or for many entrepreneurs it means investing all of their money in their own company, hoping it pays off.

When it finally does pay off, you need a different kind of strategy for wealth preservation. The things that worked to create wealth in the first place can often work against those who are now trying to keep it.

There are many reasons to change your investment strategy and pivot to wealth preservation. Many need to take a more conservative approach to their money as they reach retirement. For others, they may be estate planning and finding the best way to make sure their beneficiaries make the most of their inheritances.

Whatever your circumstances, these investment strategies will help you make sure your wealth will last you as long as you need it and that you can pass something down to the next generation.

1. Asset Allocation for Your New Financial Goals

Wealth preservation requires a different type of asset allocation than a more aggressive wealth creation strategy. Instead of looking toward growth stocks or stocks in general, your portfolio will need to shift toward more conservative, protective assets. There are several asset classes that this includes:

  • Cash
  • Bonds
  • Gold

Allocating more of your wealth to cash is one of the safest things to do if you’re concerned about losing principal, but inflation means that it’s a choice with a built-in loss. How can investors mitigate the loss of wealth to inflation without adding too much risk to their portfolio?

Interest-generating bonds are one strategy. However, even some of the highest-yielding bonds still produce less than inflation, and in the current environment, inflation rates are difficult to predict.

Gold bullion may be the cash alternative your portfolio needs for wealth preservation. It is widely used as a hedge against inflation and a safe haven asset. Gold bullion maintains its value compared to other goods over the long term, making it a great asset for passing along generational wealth.

If you’re not sure where to buy gold bullion, start with a reputable bullion dealer that can answer all of your questions about the types of bullion that are best suited for investors, how and where to store your gold, how premiums work on bullion products, and what kind of insurance you may need for this type of asset.

2. Diversify Your Allocation of Securities

Even a portfolio built for wealth preservation is going to have securities. They remain one of the most reliable ways to create and preserve wealth, and dividend stocks can also generate income. However, you may need to diversify the type of stocks you own and the kind of companies you invest in.

A wealth preservation strategy will involve a shift toward low-risk, long-term stocks. These are companies you can invest in without worrying too much about the short-term ups and downs of the market. Their value may rise and fall, but their price drops are limited, and you can be confident in their long-term performance.

Low-volatility stocks are often found in major legacy companies that perform well no matter what the economy looks like. These include companies like Disney, Procter & Gamble, Berkshire Hathaway, and others in recession-resistant names.

If a large part of your wealth comes from company stock options, one company may be overrepresented in your portfolio, adding to your risk of loss. A wealth preservation strategy relies on a more diversified approach to securities. It may be in your best interest to liquidate an overly-concentrated position and invest in a broader allocation of stocks.

3. Build Enduring Wealth with Real Estate

Smart real estate investments can go a long way toward building lasting wealth. While real estate can appreciate rapidly, successful investing focuses on cash flow. Properties that are positive in cash flow can be held for decades, isolating owners from market crashes.

The ups and downs can make real estate a difficult market to crack. One of the biggest risks with real estate comes when it is over-represented in your portfolio. A house alone is often the single biggest asset someone will ever purchase, and purchasing more real estate instead of investing in bonds, precious metals, and stocks can over-expose you to a single asset class.

There are other risks and obligations that come with adding income properties to your portfolio. Properties can face high maintenance costs, increased property taxes, and months when the property is vacant. Some income from real estate should always go to cover emergency expenses.

4. Manage Risks with Insurance

Risk management is a key component of any long-term wealth strategy. Insurance can help protect yourself and your beneficiaries against future loss. One way to make sure your investments remain intact is to insure yourself against a loss of benefits. For example, if you receive healthcare-related benefits through a spouse’s pension, you may want to look into insurance in case they pass away.

You can also use a life insurance policy to protect your beneficiaries and maintain your wealth. A life insurance policy may be able to pay any taxes your estate will need to cover, such as taxes on assets kept in an RRSP.

5. Create a Plan for the Next Generation

Finally, you will need a plan to pass your wealth down from one generation to the next. There are two main goals involved in a successful estate plan:

  • Making sure your estate can pay any taxes owed.
  • Minimizing conflict between beneficiaries.

Creating a will that provides a detailed explanation of how to distribute all of your assets will minimize friction between beneficiaries. Be sure to include assets such as real estate, life insurance policies, cash reserves, precious metals, and registered accounts.

Work with an estate planner to make sure you’re prepared for any taxes that the estate will have to pay. Even in places without an estate tax, beneficiaries may have to accept remaining mortgages on a property if they inherit the property, and taxes may have to be paid on assets held in a registered account before they can go to the beneficiary.

Building wealth is a challenge in its own right. Once you have established your savings, you want a strategy that will preserve it for your own retirement and for the benefit of your family.

Ajeet Sharma, the founder of Financegab and a well-known name in the field of financial blogging. Blogging since 2017, he has the expertise and excellent knowledge about personal finance. Financegab is all about personal finance which aims to create awareness among people about personal finance and help them to make smart, well-informed financial decisions.


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