As someone who is guilty of having a set of portfolios, which are not sufficiently well balanced, I'm keen to share my key learnings from the past few weeks, in the hope that you may be inspired, to review and improve the diversification of your own portfolios.
For sake of clarity, by portfolios, I am referring to my personal and corporate portfolios. In reading this article, you may also derive key insights, which can be applied to your pension or other types of portfolio, which are relevant to your personal circumstances.
A friend of mine recently linked me to a family office investment insights report, which was produced by Goldman Sachs. I found it to be a very educational and thought provoking report, which I would encourage you to read at your leisure.
Amongst the many insights, which gave me pause for reflection, the average asset allocation report on page 7 really captured my attention and stopped me dead in my tracks.
As someone, who has spent the past 15 years building up a real estate portfolio, I was amazed to see that, on average, the family offices who were surveyed, have just 11% percent of their wealth invested in real estate.
I'm happy to be very transparent, in saying that over 90% of my wealth is currently allocated to real estate. This represents a strong violation of the prevailing wisdom, which these family offices prescribe to.
So what's going on here? Have I been doing the wrong thing all these years?
After careful consideration, I have decided not to give myself a hard time here, as I'm proud of the real estate portfolio, which I have built.
Clearly though, I am overweight, in terms of exposure to the real estate asset class and I need to take steps to diversify my portfolios.
The Goldman Sachs report does a good job of highlighting the various different asset classes, which these family offices have allocated their wealth to. They are worthy of deeper consideration.
In conjunction with the report, I have also found this wikipedia article to be a helpful resource, as it provides an overview of the most popular asset classes.
In no particular order, we might consider diversifying our wealth across the following asset classes:
For sake of clarity, by portfolios, I am referring to my personal and corporate portfolios. In reading this article, you may also derive key insights, which can be applied to your pension or other types of portfolio, which are relevant to your personal circumstances.
A friend of mine recently linked me to a family office investment insights report, which was produced by Goldman Sachs. I found it to be a very educational and thought provoking report, which I would encourage you to read at your leisure.
Amongst the many insights, which gave me pause for reflection, the average asset allocation report on page 7 really captured my attention and stopped me dead in my tracks.
As someone, who has spent the past 15 years building up a real estate portfolio, I was amazed to see that, on average, the family offices who were surveyed, have just 11% percent of their wealth invested in real estate.
I'm happy to be very transparent, in saying that over 90% of my wealth is currently allocated to real estate. This represents a strong violation of the prevailing wisdom, which these family offices prescribe to.
So what's going on here? Have I been doing the wrong thing all these years?
After careful consideration, I have decided not to give myself a hard time here, as I'm proud of the real estate portfolio, which I have built.
Clearly though, I am overweight, in terms of exposure to the real estate asset class and I need to take steps to diversify my portfolios.
The Goldman Sachs report does a good job of highlighting the various different asset classes, which these family offices have allocated their wealth to. They are worthy of deeper consideration.
In conjunction with the report, I have also found this wikipedia article to be a helpful resource, as it provides an overview of the most popular asset classes.
In no particular order, we might consider diversifying our wealth across the following asset classes:
- Stocks e.g. buying shares in publicly owned companies
- Fixed income e.g. secured loans and government bonds, which provide regular income, in accordance with an agreed term and rate of interest
- Cash e.g. liquid funds, which can be used at any time, without needing to sell any assets to reclaim capital
- Commodities e.g gold, fine art and other collectibles that have a tangible value
- Cryptocurrency e.g. Bitcoin and Ethereum, which represent a decentralised finance model
- Private equity e.g. owning shares in private companies
- Alternative investments, as explored more deeply in this related wikipedia article
No matter where you are on your wealth building journey, I would encourage you to pause and consider how you wish to diversify your wealth, across these different asset classes.
Likewise, as part of this exercise, you may wish to think carefully about the different vehicles you can use to acquire and control these assets.
For example, when considering any new investment, you may benefit from consulting with your financial and tax advisors, in order to asses the following questions:
- Should I acquire this asset personally?
- Should I buy this asset, in the context of an existing or new company?
- Should I buy this asset, in the context of an existing or new pension?
By thinking strategically about the best ways of building your wealth, in a diverse and tax efficient manner, you are more likely reduce your risk profile and tax liabilities, whilst simultaneously increasing the rate at which you grow your wealth.
Hopefully you have found this to be a thought provoking article, which inspires you to pause and reflect.
If so, I would encourage to take stock, build an intelligence picture and move yourself forward, in a way that best serves your interests and personal ambitions.