Anyone who has worked hard all their life to accumulate wealth will be eager to protect those assets for future generations, or to benefit the causes close to their heart. In this article, we look at four popular ways of preserving and growing wealth over the long term.
1. Professional Wealth Management and Financial Planning
The covid-19 crisis provoked rapid changes in markets, prompting significant economic, political, and social volatility in countries all over the world. To protect wealth over the long term, it is crucial to formulate an effective plan that will maximize investments and provide protection from taxes and short-sighted decisions.
When unexpected needs arise, it can be tempting to simply dip into capital, intending to top it up later. Nevertheless, this seldom happens. Long-term wealth protection therefore requires sound financial planning that takes into consideration all potential threats, pitfalls, and scenarios.
Seeking out wealth management services from an experienced professional can help high net worth individuals to mitigate their taxable income and drastically reduce their tax liability. From maxing out IRAs and health savings account contributions, to starting a business, to investing in municipal bonds, there are many ways you can protect your income from taxes.
Just as tax planning is important to preserve wealth throughout your lifetime, estate planning protects a person’s assets after they die. Note that estate planning goes beyond simply drafting a will, which is merely a document that describes how you want your possessions to be disposed of. Estate plans also include provisions for the distribution of your assets and possessions to your heirs. However, they also involve the creation of a comprehensive plan that should allow your heirs to pay substantially less in estate taxes, fees, and legal costs. An estate plan can also reduce the time and privacy concerns associated with the probate process.
2. Investing in Physical Assets
Precious metals like silver and gold have been a marker of wealth for thousands of years. Deeply integrated into cultures around the world as both a status symbol and form of currency, gold is durable, divisible, convenient, and consistent.
Although any investment is vulnerable to market fluctuations, gold remains a popular mode of storing wealth among the world’s richest families. It can provide protection from inflation and deflation alike, and presents an attractive prospect for people seeking to diversify their investment portfolio. As a globally recognized store of value, gold can provide financial stability in times of macroeconomic and geopolitical uncertainty.
Real estate can provide exceptional growth potential. For centuries, wealthy families have invested in real estate, purchasing residential, commercial, agricultural, and industrial properties as well as water and mineral rights. Also an effective hedge against inflation, real estate is a special asset class that has all the markers for protecting and promoting generational wealth, particularly in the US, where property owners benefit from favorable federal tax laws. Real estate can also provide monthly income in the form of rent.
Collectibles like works of art, jewelry, cars, vintage wines, and antiques are popular modes of investment among many wealthy families. People who invest in collectibles have usually accumulated a large amount of assets already, and are generally investing on the side to preserve wealth rather than grow it. While certain collectibles can provide protection against inflation, they are primarily purchased for personal enjoyment. Sitting behind the wheel of your vintage car is certainly a lot more fun than checking the statements of your investment account. Keep in mind that it is always best to consult with your wealth management professional regarding the purchase of any high value collectible.
3. Investing in the Stock Market
Investing in corporate stock is one of the most popular methods of outpacing inflation and creating long-term wealth.
Above all, investing requires a systematic approach. Investors need to have a plan and stick to it, think long-term, and stay the course. Experts recommend diversification: investing in different asset classes, industries, financial instruments, and other categories. In this way, you avoid overexposure to the risk associated with any one type of asset.
Investors must decide their risk tolerance: are they comfortable taking a gamble on a promising new startup in the hope of achieving big returns, but running the risk of losing the entire investment? Or are they more comfortable investing in blue chip stock, backing an established market leader that provides modest but relatively reliable returns? Most people find that a mix between these two extremes works well.
Many people inherit assets, but if they do not possess the ability to preserve that wealth, it will soon be frittered away.
Education is the great equalizer. While formal education such as college and graduate degrees are important, the art of wealth preservation isn’t necessarily something you learn in a classroom. People who have successfully accumulated or managed wealth have much to share from their experience.