Two Key Rules to Preserving Wealth

Make sure you’re playing the stay-rich game, not the get-rich game.

Key Takeaways

  • Wealth preservation is the No.1 financial concern for 80 percent of successful investors—that’s been a constant for several decades.
  • You want to be in the stay-rich game, not the get-rich game.
  • Two simple rules for the stay-rich game: structure and diversification.

Remember the 1960s TV show “Sing Along With Mitch”? It featured an animated bouncing ball over the lyrics on the screen with a chorus singing in the background. As a kid, I sometimes found that show confusing. The same thing can happen in managing your investment portfolio. Sometimes investors come in to see us with a portfolio that’s been bouncing all over the investment universe. They’ve been chasing one hot investment after another—usually arriving too late to the party. After all that time, stress and effort, they have disappointing returns and a really dysfunctional portfolio.

Getting rich or staying rich?

After my 30 years in this business, one thing hasn’t changed. Wealth preservation is the No. 1 concern for the vast majority of successful individuals and families. Survey after survey confirms that.

Simple rules for staying rich

Fortunately, you need to follow only two simple rules for staying rich:

  1. Have an appropriate structure
  2. Diversify

An appropriate structure is about having a realistic balance of cash sources to fund your retirement living expenses—a structure that stands up to all market conditions. EXAMPLE: Suppose you need $150,000 a year to live, and you’ve got $50,000 coming in from pension and Social Security each year. That means you need another $100,000 a year from your portfolio. Well, you need to have at least $100,000 sitting out there in cash, or readily available cash. You also need three to 10 years’ worth of investments on hand that you can turn into cash somewhat rapidly if the markets head south or if you have unexpected medical or other large expenses.

Diversification is about not putting all your eggs in one basket in case that basket starts to fray at any given time. EXAMPLE: 2014 would have been a rough ride for you if you weren’t diversified. At the beginning of the year, we saw a sell-off in small cap domestic stocks, and all of a sudden, we saw emerging markets come back after being really hammered last year, Then we went to large value stocks, and now large growth stocks are doing well. All this happened in the first eight months of 2014!

If you tried to follow that bouncing ball, you could really be in bad shape. The name of the game is to diversify and stick with your structure so you can protect your downside risk and get that overall rate of return. You never want to be “chasing returns.”

Upcoming Events

We have two events coming up that will help you focus on staying rich and taking control of your life. On September 17 and 18 you can learn more about domiciling in Florida.  To reserve your place, please call (888) 339-5854.

And back by popular demand is our Technology Open House on October 9.  To register please fill out the form online or call our office at 847-441-5644.

We hope to see you at one of these events!

Until next time, enjoy.

800-480-7913 |

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