Personalized integrated planning and strategic diversification has given our clients greater insulation from market volatility.
Global economic uncertainty is hitting hard in the midst of the Covid-19 event, and it has created a new debt-to-income ratio measured in fear, scepticism, and panic.
Historically when there is a significant volatility in the markets we have suggested turning down the media ‘noise’ to lessen the effects of omnipresent headlines; unfortunately this time that advice is not enough. Simply put, it's rough out there, and what our clients need now is the reassurance that our strategy for navigating global market uncertainty is the same as it has been from the beginning; diversification, risk reduction and discipline.
There is no way to tune out the consistent negativity of media, much more so with the perception that our financial stability is being threatened. The volatility of the global economy, forecasting based on the threat of a pandemic, and the word ‘risk’ being used far too often and often not enough, has cast a shadow of doubt in the money mindset of Canadian investors. People are worried, and this is especially true for investors who are currently limited to stocks, which are often too volatile, and bonds, where returns are too low.
Stocks and bonds are black and white, and with only these two options to invest in, it is much more realistic to say that this creates a ‘gambler’ in the market - not an investor. Of course all investing is gambling to a certain extent, however investors have far more options than they are commonly told. There are alternatives, and in terms of investment options during periods of extreme volatility, these alternatives when properly managed have stood the test of time.
Alternatives are investment options that sit outside of the ‘status quo’. They are composed of everything from real-estate opportunities, to ‘Unicorn’ startups half way across the world, all with the commonality of not being common at all. They tend to have very few significant investors instead of the masses we see in the traditional stock and bond investment structure; this can increase the risk, but if they are diversified throughout your portfolio, they offer significant protection from market volatility.
With the extreme volatility we have all seen and experienced in recent years, why aren't more investors seeking out Alternatives?
1. Many desirable alternative investments are out of reach for the majority of investors. The options to invest have a significant minimum barrier to entry that keep them available only to the Ultra High Net Worth, institutional investors and pension funds.
2. The status quo. Many investors are timid when it comes to ‘investing outside the box’. The belief that the markets always come back is stronger and more reassuring to them than the ‘alternative’.
WealthCo’s model portfolios bring significant value to our clients’ experience with our investment philosophy by providing depth and purpose to the entirety of their portfolio. Each model portfolio is designed to be well diversified across multiple asset classes, including alternative investments not normally available in public capital markets. Inspired by the work done in many of the leading pension funds and endowments, our model portfolios include allocations to alternative asset classes such as hedge funds, private equity, real estate, private mortgages, and debt in addition to meaningful investments in more traditional equity and fixed income investments. The intent of our portfolio design is to lower the expected volatility over time without compromising the expected long-term rates of return.
In addition to concerns regarding market volatility, individual investors, family enterprise, and small business owners should look to insurance as an alternative asset class.
If you’re a business owner, insurance can provide not only protection, but also opportunity when it comes to growing your business. Life insurance policies can protect shareholders and their family members, the corporation itself, and key persons to the business. And, it can also enhance the cash flow to the corporation by assigning the policy as collateral for a loan.
As an individual investor, or a family enterprise, insurance....can provide depth and security. The creation of liquidity in the event you become ill, are unable to work, or worse, ensures that capital is always available from an outside source. An insured event means the need to draw income from a portfolio or a business that has been battered by market forces is not necessary. Insurance can provide you, your family and your enterprise with confidence the legacy you have created will be protected.
The extreme volatility we are seeing today requires a ‘two feet on the floor’ approach by all integrated wealth advisors with clients who stand to be affected. Advisors and clients need to enter into a ground level risk and review period to address concerns that are a perceived threat to goals and objectives for the future. Although future forecasting is difficult not only fiscally but emotionally as well, strategies and solutions that ease the minds of clients is what integrated wealth advisory was designed for - a three hundred and sixty degree view of options and strategic implementation - and now is the time for Canadians to engage and get a return on investment through trusted advice.
Contact us to book a free Portfolio and Insurance review. WealthCo stands beside each of our clients and their unique goals and objectives for the future with long term growth, development and a shield against the volatility of a rapidly changing economic landscape.