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5 things the ultra-wealthy do to prepare for possible downturns



A recession may be imminent, and the ultra-wealthy take notice.

Many of them are reorganizing their portfolios in an effort to protect their assets, a group of certified financial planners told Business Insider. Their strategies vary from person to person based on their risk tolerance, said certified financial planner and senior vice president of Arizona wealth company Moors & Cabot Ashley Folkes to Business Insider.

"Over the years working with high net worth customers, [has been] tended to protect and then grow its wealth," Folkes said. "We are discussing how much unnecessary risk you want and are willing to take to meet your goals. For now, I see conversations with investors shifting to a slightly more defensive stance."

Read more : Billionaires tend to make riskier investment choices than millionaires, and it helps explain why individuals with extremely high value lost so much of their money in 201

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Older ultra- Wealthy Americans are the most eager to change their portfolios pending a market correction, said certified financial planner Ben Smith of Wisconsin-based Cove Planning to Business Insider.

"We have investigated going into high-quality fixed income and even alternatives to obtain ballast in an unstable stock market," Smith said.

Here are five things the ultra-wealthy are doing to prepare for a recession, according to their financial planners.

1. Wealthy investors dig bonds.

A reverse bond yield curve is not only an important indicator of a shrinking economy, according to Certified Financial Planner Steven Kaye, CEO of AEPG Wealth Strategies in Warren, New Jersey. Short-term bonds have offered investors higher returns than their long-term counterparts since the yield curve first reversed on August 28, Business Insider reported earlier.

"Bonds have little value at the moment, other than portfolio ballast," Kaye told Business Insider.

Reducing customers' exposure to bonds also reduces their exposure to fluctuations in interest rates and the overall market, Kaye said, two things that would be plentiful in the recession.

Read more : The yield curve is the other way around. Here is what it means and what the consequences for the economy are.

2. Instead, they make money to maintain liquidity.

Moving your fortune into cash is a popular way to make sure it undergoes a recession, according to Certified Financial Planner Samuel Boyd, who also serves as Senior Vice President for Capital Asset Management in Washington, DC "The Key to Surviving, and flourishing, in any recession there is access to liquidity, "Boyd said. "As the old saying goes," cash is king "and it can curb portfolio risk as well as provide a corner to capture opportunities when the world is up for sale."

Billionaire hedge fund manager Sam Zell of Equity Group Investments also shifts assets under his management into cash, according to MarketWatch. We certainly never had a cash position like we have now, "Zell said." I think we are very cautious about the opportunity. We think there will be some significant opportunities, but what we don't see is urgency. "

3.1% embrace ETFs to protect their wealth from unnecessary risk.

For high value individuals, ETFs provide a lower risk of keeping you in the market amid increased stock volatility.

"If you want to be invested in stocks until there is a stronger sense of a recession, you can switch to the index ETF, to the index low volatility ETF's," Folkes told Business Insider.

Folkes recommends also individuals with high net worth who want to mitigate the risk of investing in long-term dividend-paying stocks.

"Switch more to high-quality dividend-paying companies that have historically proven that they can handle long-term weaknesses in the market by having low debt and solid balance, "Folkes said. [19659008] 4. They pay down debt.

Even high net worth individuals who have not redistributed their portfolios in anticipation of a market correction, want to refinance and pay down the debts but s interest rates are still relatively low, New Jersey-based certified financial planner Jared Friedman of Redwood Planning said. Business Insider.

"Clients ask for it and discuss it more, but have not made any allocation changes at this time," Friedman said. "We are trying to proactively pay off any extra debt and save more money."

5. The best thing the ultra-wealthy can do is stop trying to play the market.

Ultimately, but the best nervous investors with high net worth can do for their portfolios may not be at all, Smith told Business Insider.

"I have received a few questions from these customers about their current allocation and how different market scenarios will affect potential returns," Smith said. "I reiterate that their risk tolerance, asset allocation, and ultimately their portfolio mix, reflects a potential downturn in the markets, and the most important thing they can do to maximize the likelihood of achieving long-term goals is to stick to their plans and not give in to emotions. "


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