What Is Your Investment Strategy?
Many recent conversations with our clients have revolved around investment strategy and the role it plays in asset protection planning. Like asset protection, investing is very much about identifying risks, deciding which risks are worth taking, avoiding other risks. In short, both investing and asset protection are about risk management.
Investing With An Asset Protection Mindset
The most commonplace risk that Lodmell & Lodmell has traditionally helped clients avoid is the risk of lawsuits. It’s worth the time, effort, and money to hedge against lawsuit risk for one simple reason: Without asset protection planning in place, a lawsuit could be absolutely catastrophic. It could wipe out your entire net worth and leave you with nothing to show for your years of hard work. Investing with the wrong strategy could be equally devastating.
Return of Your Money Is The New Return on Your Money
One important aspect to investing with an asset protection philosophy is realizing that traditional methods of investing involve more risk than may at first be obvious. Traditional wisdom is to buy and hold. Well, if you had bought most asset classes in 1998 and held through 2008, you would have lost a lot of money. The fact is that today there are unknown risks built into the market. There is not only market risk (which most of us are used to) but there is also institutional risk.
Institutional risk goes beyond the risk of a bank or brokerage house failing and taking your money with it (think MF Global). It also involves the risk that when a bank (or European country) fails, it could take the market down with it. Add that to the fact that many banks and brokers trade for their own account–and many times in exactly the opposite direction that they advise their clients to trade–and you have a recipe for a potentially catastrophic outcome in the market.
Viewed in that light and combined with some of the lowest interest rates in history, a return of your money from banks is the new return on your money.
So How Do You Generate A Return?
The answer is simple. Put most of your money in an absolutely safe place like a Swiss private bank or Treasury Direct where you will actually pay a fee to remove institutional risk. Then, with the portion that you are willing to put at risk for a reasonable rate of return, invest it in a vehicle that is designed to take only market risk.
What does that mean? It means you need to avoid ETFs, mutual funds, and other synthetic products that actually charge you a fee to give you less performance than the market itself will actually give you. If you have questions regarding what kinds of products are pure market risk plays, call an asset protection attorney today!