High net worth and ultra-high net worth families work with a team of advisors that provide something called family office wealth management services. They use these financial experts to help them set goals, monitor their diverse investment portfolios, and manage their assets. For those of us with smaller net worths and less complicated investment portfolios, we can learn from wealthy investors and their families investment strategies when planning for the future. In fact, many studies and experts will agree that HNW and UHNW investors think long term. These investors can plan for 10 to 20 years and beyond (Investopedia), selecting investment strategies that will get them where they want to be decades from now.
In addition to long-term investment strategies, the following is a list of tactics that many investors have included in their families’ overall investment strategies.
5 Families Investment Strategies:
1. Get Professional Financial Advice
You may not have the portfolio to justify hiring a family office wealth manager, but there are other types of financial services you might consider. Some financial advisors charge percentages (as low as .25% to 1% of your total assets, according to NerdWallet), while others may charge flat fees. Types of financial advisors include:
- Robo-advisors (AI-powered platforms)
- Certified financial planners
- Wealth managers
- Portfolio managers
You might start with your local bank, many of which offer financial services. You might also explore options if you have a company-sponsored 401k, for example. Before hiring an expert, learn about the types of financial advisors and their fee structures.
2. Explore Future-Proof Investments
There are various asset classes you can choose to invest in that can help protect your money against unpredictable markets and economic events. .
Families investment strategies often include future-proof investments, which are typically low-risk, low-return, long-term investments. Your financial advisor can direct you to these types of investments, as well as help you determine what percentage of your portfolio is invested in these types of assets.
3. Have a Backup Plan
Most families depend on one or two income streams, and they don’t have time or resources to diversify their income streams through side hustles or part-time gigs. Ideally, you’re working less and spending more time with your family. Still, an important part of protecting your family’s financial future is thinking about the “what ifs.” What if you or your spouse lose a job? What if someone falls seriously ill? What if you expect a new family member (baby, elder parent, foster child)? What if there’s a global pandemic (again)?
A key component of families investment strategies is maintaining an emergency fund. Experts often recommend setting this fund at the equivalent of three to six months, or even one year, of your bring-home income. Set aside a portion of your income towards the emergency fund, ensuring that these funds are only used in case of an emergency.
The second component is exploring passive income streams, side hustles, and gig-economy opportunities to supplement your income.
4. Invest in Your Child’s Future
Children’s education is getting expensive with each passing year, and starting in advance will ensure you can give your children the best education without worrying about student debt. Setting up small term as well as long-term funds that mature after a certain period of time can help to offset college expenses, for example.
In the U.S., there are 529 plans that offer tax advantages for certain educational expenses. Your financial advisor can help you understand the current laws and procedures for 529 plans. Ask about tax-advantage plans for your children’s future, whether they are college-bound or not. Future planning may help offset the future stress of student loans.
5. Where to Begin Family Financial Planning?
Start small and build. The best families investment strategies begin with education. Learn as much as you can about tax laws that benefit middle class families as they prepare for their children’s future as well as their retirements. You don’t have to do everything at once. Start small by changing your mindset from “getting by” to “getting ahead” and then to “getting comfortable.” Habits start with practice.
