With so much uncertainty in today’s global markets, developing a plan to protect your financial well-being has never been more important, in particular if you have accumulated a substantial amount of wealth.
That’s why many US-based investors are increasingly turning to Swiss wealth management firms based on Switzerland’s reputation for stability and expertise in managing investments in global markets.
In our article, we’ll explore three Swiss wealth management strategies for high-income earners:
- The power of asset diversification and global investing
- Assessing your risk tolerance
- Why active portfolio management matters in volatile markets
The Power of Asset Diversification and Global Investing
As someone who has accumulated substantial wealth, you want to be sure your assets are properly diversified to minimize the risk of large losses associated with more concentrated positions.
Why is diversification a crucial investment principle for high-net-worth investors? Diversification is the primary strategy for managing risk. A bad decision only impacts part of your investments.
Diversification involves the allocation of your investments across multiple asset classes and geographies. For example, stocks, bonds, cash equivalents, and real estate in several countries. This approach is based on the straightforward premise that different asset classes may perform differently in the same market conditions.
Global investing is a higher form of diversification for US-based investors. Like you may wear a Swiss watch and drive a German car, the best investments are not headquartered in the US. One way to think about global investing is that it matches your consumption. The best cars are German, the best watches are Swiss, and the best technology is Silicon Valley.
The same economic conditions may impact different parts of the world. It may be possible to produce positive returns in one country when another country is producing negative returns. This offsetting performance reduces your risk.
It’s noteworthy to address additional issues when you invest globally. Currency fluctuations, political instability, and different regulatory environments can create additional risks for global investors. This is where the services of an experienced Swiss wealth management firm can be very beneficial. A global management firm can help you develop and implement a global investment strategy – the Swiss firm does all of the heavy lifting.
Download our new eBook: “There Are Many Reasons Why Americans Decide to Hold Assets in Switzerland.”
Assessing Your Risk Tolerance
Market fluctuations are inevitable whether you’re investing domestically, internationally, or globally. Many investors think volatility and risk are the same, but that is not necessarily correct. Securities markets fluctuate with economic conditions, which go up and down constantly.
The stabilizing force is understanding your risk tolerance or capacity for taking risks. Are you willing to accept short-term volatility to pursue long-term goals?
An important consideration is when you are going to retire. You should be more conservative if you have a few years until your retirement date. If you have ten or more years to retire, you can afford to take more risks. You have more time to recover from a bad year or two.
As an experienced Swiss wealth management firm, we specialize in helping our clients manage their risk tolerance. At LFA, we create tailored investment portfolios based on a wide range of variables that impact our clients: Age, risk tolerance, timelines, and goals (partial list). Then, we build and manage portfolios based on our clients’ needs and aspirations.
This personalized approach ensures that your financial plan is optimized for performance and risk in a way aligned with your long-term goals.
Why Active Portfolio Management Matters in Volatile Markets
When dealing with volatile market conditions, the more traditional “set-it-and-forget-it” investment model may not be your best portfolio management option. Several potential drawbacks could impact your net rates of return.
- One key disadvantage is the limited adaptability of a set-and-forget strategy. In volatile markets, economic conditions can change rapidly. Your investment portfolio may need to be aligned with the current market, which can undermine your investment returns.
- Global investing has inherent risks that should be discussed before making any investment decisions. You know about currency fluctuations, but there are also geopolitical events that can have a substantial impact on market performance. A set-and-forget strategy can have a hard time being more responsive to these market events.
- Markets are inherently dynamic, and investment opportunities may arise in even the darkest times. It pays to have a buying reserve to take advantage of opportunities as they present themselves.
- Personal financial goals and risk tolerance can vary widely. A one-size-fits-all approach may not be fine-tuned to take advantage of investment opportunities as they present themselves.
- Tax implications can significantly impact your net returns. You must manage your investments actively to maximize returns and minimize taxes in multiple countries.
- Sudden market shocks, such as economic crises, regional conflicts, or industry-specific events, can severely impact your portfolio. Without active management, your investments may not be prepared to weather the stormy seas.
- Asset allocation plays a vital role in portfolio performance. A set-and-forget strategy may lead to an inefficient allocation of assets for current market conditions, thereby hindering your portfolio’s overall performance.
Swiss wealth management firms, renowned for their expertise in financial planning and investment management, recognize active investment management’s role in pursuing your investment goals.
Get to Know LFA
LFA provides financial solutions to US investors who want to invest in the global securities markets. We are uniquely qualified to provide bespoke wealth management services that are finely tuned to meet the expectations of our clients seeking performance, risk management, and tax-efficient investment alternatives.
We are a Registered Investment Advisor with the US Securities and Exchange Commission.
We can coordinate your wealth management requirements with Swiss banks, global law firms, estate planning specialists, and certified public accountants.
Above all, we are a service-driven organization committed to delivering highly personalized financial counsel and global investment management services.
Our approach is based on our in-depth understanding of four client requirements: Competitive investment returns, complex financial and retirement planning, effective risk management, and tax minimization strategies.
We invite you to connect with us to learn more about our customized wealth management services for residents of the US.
