Recently, the Wharton Global Family Alliance (which is a consortium of sorts that allows wealthy families to measure their investment returns against those of others in the alliance) noted that wealthy families made some important changes over the past three to four years.
They made changes largely due to the market and economic turmoil that began in 2007, and the important changes they made were in fact adjustments to their portfolio's asset mix as well as asset selection process.
These two key changes are discussed here.
1.
The families who are part of the alliance saw a greater shift from riskier assets into less risky assets.
Ultimately, this has meant moving funds out of equities and into bonds.
For most families, it was a reduction of 50% in equities.
The money they reduced their equity holdings by ended up going into fixed income securities, such as bond.
But of course, the shift in asset classes did not end there.
They also increased their exposure to hedge funds and other specialty asset classes, such as gold and other collectible assets (e.
g.
art, antiques).
With a greater need for liquidity and a closer eye on downside risk, these wealthy families adapted to market conditions and purchased bonds while rates were a little higher.
This has yielded positive returns over the past three years.
2.
These wealthy families increased their level of due diligence when investing in any asset class.
For most of these families, the requirement to fully understand the type of investments they were making had heightened importance, a policy that will continue into these periods of future growth.
For many of these families who have been able to extend their wealth through several generations, asking the right questions and educating themselves on the actual investment holdings (rather than giving their managers and advisers full discretion on trading) has allowed them to feel better about their investments and stay invested during questionable market and economic periods.
This is key to ensuring long-term success with investments.
Several questions most people will have will relate to whether these families have since started to shift back into equity type of investments.
Regardless of whether this has started to happen, individual investors will know that the due diligence practiced will also help these families prepare or adapt their portfolios for those downside risks.
In fact, due diligence and proper asset mix often work hand in hand, something we can all benefit from even if we are not considered "wealthy families.
"
They made changes largely due to the market and economic turmoil that began in 2007, and the important changes they made were in fact adjustments to their portfolio's asset mix as well as asset selection process.
These two key changes are discussed here.
1.
The families who are part of the alliance saw a greater shift from riskier assets into less risky assets.
Ultimately, this has meant moving funds out of equities and into bonds.
For most families, it was a reduction of 50% in equities.
The money they reduced their equity holdings by ended up going into fixed income securities, such as bond.
But of course, the shift in asset classes did not end there.
They also increased their exposure to hedge funds and other specialty asset classes, such as gold and other collectible assets (e.
g.
art, antiques).
With a greater need for liquidity and a closer eye on downside risk, these wealthy families adapted to market conditions and purchased bonds while rates were a little higher.
This has yielded positive returns over the past three years.
2.
These wealthy families increased their level of due diligence when investing in any asset class.
For most of these families, the requirement to fully understand the type of investments they were making had heightened importance, a policy that will continue into these periods of future growth.
For many of these families who have been able to extend their wealth through several generations, asking the right questions and educating themselves on the actual investment holdings (rather than giving their managers and advisers full discretion on trading) has allowed them to feel better about their investments and stay invested during questionable market and economic periods.
This is key to ensuring long-term success with investments.
Several questions most people will have will relate to whether these families have since started to shift back into equity type of investments.
Regardless of whether this has started to happen, individual investors will know that the due diligence practiced will also help these families prepare or adapt their portfolios for those downside risks.
In fact, due diligence and proper asset mix often work hand in hand, something we can all benefit from even if we are not considered "wealthy families.
"
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