The mere thought of watching your hard-earned wealth evaporate is enough to keep any investor up at night. And it's not an unfounded fear, especially considering the geopolitical storms and economic uncertainties that have shaken the world's high-net-worth individuals. Particularly in North America, these factors have triggered the steepest drop in wealth in ten years, with a 7.4% decline by the close of 2022 according to Capgemini’s World Wealth Report.
As we stepped into 2023, the global scene didn't get any brighter with crises like the war in Ukraine, Israel, and the ensuing energy crunch leading to a "permacrisis" and a 10% global wealth fall in US dollar terms. All of these factors, coupled with the uncertainty of the next upcoming administration, have all impacted the overall economy. However, despite this decline, a significant portion (69%) of high-net-worth individuals are optimistic about their wealth, expecting it to increase within the year. So, what's their secret?
The reality is it’s not a secret. True wealth building is created by having multiple passive income streams, and each requires attention. Sophisticated investors know that as their wealth is built, It's crucial to adopt a proactive approach to wealth preservation. Here are 5 detailed strategies that can help you safeguard your wealth and ensure long-term financial stability and continued growth.
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1. Comprehensive Wealth Management and Insurance
Effective wealth management is about more than just investment. It involves a holistic approach that includes long-term wealth protection strategies. Diverse insurance policies such as homeowners, life, disability, and excess liability act as a safety net for your assets. Estate planning is also critical; instruments like irrevocable trusts can offer creditor protection and ensure your assets are passed down as intended. This comprehensive approach ensures that all aspects of your wealth are protected and thriving.
2. Avoid the Pitfall of Inaction
One of the biggest threats to growing wealth is not investing at all. While it's essential to be cautious and well-informed, excessive fear can lead to missed opportunities. Disciplined investors know that money left idle, especially in times of inflation, can quickly erode in value. In a recent study by Wharton, “How the Wealthiest Got to Where They Are” the picture is very clear: true wealth is built with investing as a core component. Whether your wealth was inherited as “old money” or you’ve worked your way up on your own to the category of “new money”, it’s clear that returns from investments are a vital component of how wealth has been built across generations.
3. Diverse Investment Portfolio
While diversification across various asset classes is crucial, real estate is generally a cornerstone of nearly all wealth strategies. This is because real estate investments offer the potential for capital appreciation, income through rents, and diversification from market-linked assets that can be highly volatile. Multifamily, in particular, provides a significant hedge against inflation. By including multifamily real estate in your portfolio, you're not just investing in physical assets; you're investing in a tangible, controllable asset that can provide both stability and significant growth potential.
4. Leveraging Tax-Advantaged Accounts
Individual Retirement Accounts (IRAs) are a powerful tool for both wealth preservation and growth, thanks to their tax advantages. Whether you opt for a traditional IRA, which is taxed upon distribution, or a Roth IRA, taxed upon contribution, both can significantly enhance your wealth over time. Be mindful of annual contribution limits and consider consulting with a financial advisor to maximize these benefits.
5. Self-Directed Precious Metals IRA
For those looking to combine the tax advantages of an IRA with the stability of physical assets, a self-directed precious metals IRA is an excellent option. This type of IRA allows for a broader selection of assets, including gold, real estate, crypto, and investing in businesses, giving you more control over your retirement savings. By including physical precious metals like gold, you're adding a layer of protection against market volatility and inflation.
The erosion of wealth experienced by many in 2023 is a stark reminder of the need for strategic planning and proactive management. By implementing these advanced strategies, consulting with your financial planner and other experts, high net worth individuals can not only protect their assets but also position themselves for continued growth and stability. Remember, the key to preserving and enhancing your wealth lies in a comprehensive, well-rounded approach that adapts to changing economic landscapes.
As always, Be Bold, Be great, and Keep Pushing Forward!
P.S. If one of your priorities, like mine, is building and preserving your wealth through multifamily real estate investments, click here to discuss how we can partner together.
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About Ellie Perlman
Ellie Perlman is the founder of Blue Lake Capital, a commercial real estate investment firm specializing in multifamily investing throughout the United States. At Blue Lake Capital, Ellie partners with both institutional and individual investors to grow their wealth by achieving double-digit returns by investing alongside her in exclusive multifamily deals they usually don't have access to.
A defining factor of Blue Lake Capital’s strategy is founded in utilizing machine learning/artificial intelligence throughout the course of all acquisitions and asset management. This advanced technology enables the company to produce accurate and data-driven forecasting for all assets on a market, property, and even tenant basis. In doing so, Blue Lake is able to lead commercial investments with the full capabilities of today’s technology.
Ellie is the founding host of REady2Scale, a podcast that highlights the assets, processes, and strategies for the multiple approaches to successful real estate investing.
She started her career as a commercial real estate lawyer, leading real estate transactions for one of Israel’s leading development companies. Later, as a property manager for Israel’s largest energy company, she oversaw properties worth over $100MM. Additionally, Ellie is an experienced entrepreneur who helped build and scale companies by improving their business operations.
Ellie holds a Masters in Law from Bar-Ilan University in Israel and an MBA from MIT Sloan School of Management.
You can read more about Blue Lake Capital and Ellie Perlman at www.bluelake-capital.com.
*The content provided on this website, including all downloadable resources, is for informational purposes only and should not be interpreted as financial advice. Furthermore, this material does not constitute an offer to sell or a solicitation of an offer to buy any securities.