An emerging trend in elite wealth management services attracting much attention is endowment-style investing. Many successful families and individuals are adopting this investment strategy.
While endowment-style investing was primarily used for large institutions and endowments, it’s become much more accessible for discerning individuals and families.
As a Nashville-based wealth management firm, we have provided financial services to successful individuals and families for over 30 years.
In this blog, we’ll share various features and benefits you can expect using endowment-style investing.
An Overview of Endowment-Style Investing
At its core, endowment-style investing is about diversification but different from the kind you might be thinking of with a typical stock and bond portfolio. Instead, it broadens the scope to include risk mitigation strategies as well as alternative investments like private equity, private debt, and real estate. This type of diversified portfolio aims to provide both capital appreciation and income while limiting your downside risk when markets are volatile.
How is performance and risk management possible from the same portfolio? It is sophisticated diversification at a high level. Not all asset classes are going in the same direction at the same time: It’s beneficial for some of your portfolio to zig while others zag.
To be more specific, think of endowment-style asset allocation as a way to counter-balance market volatility. Using alternative investments, the goal is to have a percentage of your assets that aren’t directly correlated to the stock market, inflation, or interest rates. For instance, alternative investments may perform better during market volatility than certain stocks.
Why Are High Net-Worth Individuals Embracing Endowment-Style Investing?
As noted over the past few years, more high-net-worth individuals and top earners utilize endowment-style investing. We expect this trend to continue as the global securities markets become increasingly volatile.
What else is driving this change? There is an increasing need for stability in an increasingly volatile world. Consider this:
- The U.S. has a $32 trillion national debt that continues to rise with little or no possibility of slowing down;
- Continued rising inflation;
- The possibility of a recession in the next six months to a year;
- Rising longevity with more people are living past 100;
- An increasingly volatile global economy.
In a time of unprecedented economic, social and political uncertainty and market volatility, the diversified nature of endowment investing makes for a more balanced investing approach.
By spreading your investments across a wide range of asset classes and strategies, you are better positioned to wait out considerable valuation swings in the market to protect and nurture your wealth.
But it’s not just about hedging against risks. Endowment-style investing in Nashville should align with your long-term goals, including wealth preservation, accumulation, and legacy planning. The endowment approach, emphasizing sustainability and growth over extended periods, aligns perfectly with this mindset.
Harnessing the Power of Diversification
Think of diversification as a financial safety net for your assets, the last true ‘free lunch’ in investing. By spreading your investments across various domestic and international asset classes, endowment-style investing aims to help shield you from any single market event that could damage a significant percentage of your investments.
Diversifying means more than just geographical or sector diversification in stocks. It’s about having a bit of everything – because you do not have a crystal ball to predict the future performance of specific investments or particular categories.
While diversifying investments is a proven and effective method of investing, it’s also important to diversify your tax strategies as well.
Alternative Investments: The Crown Jewel of Endowment-Style Investing
Alternative investments are often the distinguishing feature of endowment-style portfolios. They offer a chance to tap into markets and opportunities that aren’t always accessible through traditional investment practices (stocks, bonds, cash equivalents). Moreover, they often respond to different market dynamics, providing that sought-after lack of correlation with the broader stock market.
The question now becomes, “How to invest like an endowment?”
It starts with understanding which alternative investments would be appropriate to help you achieve all that is most important to you and your family. This is where elite wealth management services come into play.
You need an experienced and tested financial professional with the knowledge and foresight to create a comprehensive financial plan and investment strategy based on your needs and goals. Ideally, he or she will serve as your financial advocate and Personal CFO as your wealth grows.
At Silberman Wealth Strategies, we’re a different type of wealth management firm. Our clients look to us to help them pursue an amazing life of significance. Three primary principles drive our customized wealth management services:
- Prioritize and protect those you hold dear;
- Contribute to causes close to your heart;
- Leave a lasting impact on the world.
Our founder, Mitch Silberman, has over 30 years of financial services experience, initially as a CPA and wealth advisor. Mitch’s story is not your typical financial professional’s tale.
From his days as a child actor, experiencing the highs of success and the lows of financial challenges, he learned the importance of a solid financial foundation. This personal journey ignited a passion in him: To guide others towards achieving their financial dreams.
For three decades now, he’s been the trusted advisor who people entrust their life savings to, ensuring their wealth not only grows but is protected. Specializing in working with affluent individuals and families, Mitch creates strategic financial planning along with sophisticated endowment-style investing for his clients.
He’s not just in it for the business; he’s in it for your personal success stories.
Connect with us today to see if endowment-style investing is right for you.
The views stated in this piece are not necessarily the opinion of Cetera Advisor Networks LLC and should not be construed directly or indirectly as an offer to buy or sell any securities. Due to volatility within the markets, opinions are subject to change without notice. Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed. Past performance does not guarantee future results. Cetera does not offer direct investments in commodities. Converting from a traditional retirement account to a Roth retirement account is a taxable event. A Roth IRA offers tax free withdrawals on taxable contributions. To qualify for the tax-free and penalty-free withdrawal of earnings, a Roth IRA must be in place for at least five tax years, and the distribution must take place after age 59½ or due to death, disability, or a first time home purchase (up to a $10,000 lifetime maximum). Depending on state law, Roth IRA distributions may be subject to state taxes. Re-balancing may be a taxable event. Before you take any specific action be sure to consult with your tax professional. The return and principal value of bonds fluctuate with changes in market conditions. If bonds are not held to maturity, they may be worth more or less than their original value
Registered Representative offering securities and advisory services through Cetera Advisor Networks LLC, member FINRA/SIPC, a broker/dealer and Registered Investment Adviser. Advisory services also offered through SILBERMAN WEALTH STRATEGIES, INC. Cetera is under separate ownership from any other named entity. Located at 320 SEVEN SPRINGS WAY STE 250, BRENTWOOD, TN 37027
For a comprehensive review of your personal situation, always consult with a tax or legal advisor. Neither Cetera Advisor Networks LLC nor any of its representatives may give legal or tax advice. All investing involves risk, including the possible loss of principal. There is no assurance that any investment strategy will be successful. Some IRA’s have contribution limitations and tax consequences for early withdrawals. For complete details, consult your tax advisor or attorney. Distributions from traditional IRA’s and employer sponsored retirement plans are taxed as ordinary income and, if taken prior to reaching age 59 ½, may be subject to an additional 10% IRS tax penalty. A diversified portfolio does not assure a profit or protect against loss in a declining market