Like a six-foot sub sandwich at a Super Bowl watch party, wealth is one of those things that can disappear quickly if you aren’t paying careful attention to it.
Why does that matter?
Because wealth is a key resource in achieving the goals you set for your own life. And, if your wealth is protected and managed well, it might even be a key resource your heirs can use to achieve goals in their lives!
There are plenty of ways to protect your wealth so that it works for you and your future generations. Keep reading for confirmation on the wealth protection tips you’re already applying and to learn some lesser-known tips to try from our collection of quotes courtesy of financial experts from all walks of life.
7 Important Wealth Protection Tips From Experts Across Industries
To the facts we know but could always use a refresher on — like budgeting and diversification — to some lesser-discussed elements of wealth — should you and your spouse keep separate bank accounts? — here we share seven great wealth protection tips and advice from the financial experts who back them up.
No Surprises Here: Diversification is the Top Tip
Among the various financial experts to whom we spoke for this article, one wealth protection tip came up time and time again: Diversification.
Diversification is the process of varying the assets in which you’re invested. Because it’s extremely unlikely that every asset class — stocks, bonds, real estate, currencies, and some more modern ones that we’ll explore soon — will bottom out at the same time, diversification is a great way to protect portfolios from the natural fluctuations that impact every asset class.
“Diversification plays an important role in wealth preservation,” said Frank Nargentino, Certified Financial Planner and Chartered Retirement Plan Specialist at North Shore Wealth Management. “More importantly diversification among different asset classes. Asset allocation should consider the correlation of the investments being used. A properly diversified portfolio will consist of asset classes that work independently of each other. Owning 3 large-cap growth funds may sound like diversification, but those investments will probably go up or down together.”
For a fresh new asset class that you can be confident will work independently from your current investments and effectively diversify your portfolio, look no further than digital assets.
Digital assets include websites, digital currencies, domain names, trademarks, software platforms, revenue-generating social media accounts, and more.
In a 2020 survey by Fidelity Digital Assets, institutional investors reported being “very interested” in digital assets, J.P. Morgan Chase just launched a business division devoted to blockchain, and Cambridge Associates encourages institutional investors to explore digital assets in a recent report, Cryptoassets: Venture into the Unknown.
While some of our wealth protection experts agree with the charge toward digital assets — cryptocurrency in particular — others have a different outlook on the value of digital assets for investors.
“ … Stimulus packages are devaluing national currencies, particularly the U.S. dollar,” said Jack Choros, CMO at Sophisticated Investor. “Hyperinflation is taking over Venezuela. It will take over other countries. Crypto will be a great hedge in the long run.”
Ilias Louis, Founder and CEO at Kryptonio, has a similar outlook on the growth of crypto: “With the FED printing so much money, the dollar’s value is going down. While we’re not going to feel the impact right away, you can be sure it will be coming in the next two to three years. As we start to feel the loss of our purchasing power and the confidence crisis hits fiat currencies, more and more people will start looking for alternatives.
“Naturally people will turn to precious metals, like gold and silver, as they have done so many times in the past. This environment is going to be very good for the price of gold. But there is also a high chance that people will start using Bitcoin as money, instead of fiat currency.”
But not everyone is on board with digital assets, yet: “It depends,” said Brian Martucci, Finance Editor at Money Crashers. “These types of alternative investments can add depth to a well-balanced portfolio, but they’re not for amateurs. Indeed, most fiduciary financial advisors recommend against alternative investments in most circumstances. The typical investor simply isn’t sophisticated enough to understand the risks involved.”
Rebalance Actively and Often
The practice of rebalancing your portfolio means checking out your asset allocation and buying or selling assets as needed to get your portfolio re-aligned with your risk tolerance and goals.
Investors who enjoy being deeply involved in their portfolio can of course rebalance manually, but some may prefer digital financial platforms called “roboadvisors” that automate much of the investment process.
“Regularly rebalance your investments,” advises Brian Martucci. “It doesn’t matter whether you use an automatic rebalancing tool (common these days in low-cost robo-advisor setups) or take the time to manually rebalance. The important thing is maintaining diversification over time.”
Rebalancing is a key element of wealth protection just for that reason — it keeps your portfolio diverse while also giving you an opportunity to review your goals and how your assets are helping you meet them.
“Rebalancing your portfolio is crucial to wealth preservation,” said Frank Nargentino. “As the investments progress some of the assets that have appreciated should be sold and those that have come down should be purchased. This should be done via small incremental changes. It is important to resist the very human instinct to sell the ones that are down and add to the ones that are up. If rebalancing is done wrong it will lead to a less diversified portfolio with increased risk.”
Classics that Keep on Working: Saving and Budgeting
We really appreciated what Justin Nabity, Founder and CEO at Physicians Thrive and a certified financial planner, had to say in response to the question “What easy habits can everyday people develop to protect their wealth?”
“[Save] unexpected cash,” Nabity said. “One easy and effective habit for wealth protection is pretending that little bonuses or earnings from small investments here and there do not exist. Then putting that money into other investment accounts so that it’ll add up and help you avoid lifestyle inflation.”
Saving any surprise income to build wealth and avoid lifestyle inflation? Check.
Now for another classic wealth protection tip that we can all stand to revisit: Good ol’ budgeting.
Justin Nabity again: “[Monitor] your spending. On average, there is more money debiting your account than it is crediting in and that is why most people cannot build and protect their wealth. Keeping a track of your spending with the help of automated apps, such as Mint and Expensify, or manual trackers is a right step towards building wealth.”
Learn more about Mint for budgeting as well as its counterparts for financial advice and an overview of your financial health with our guide Personal Capital vs. Mint vs. Kubera.
Plan for Wealth Protection in Your Long-Term Relationships
We thought that this tip from the CEO at DebtHammer, Jake Hill, was a good way to introduce the topic of viewing wealth protection via a lens through which it isn’t typically examined: Relationships.
One thing that's somewhat taboo in this country is the idea that you should maintain a separate bank account from your spouse,” Hill said. “I am a strong believer in doing this for your wealth and financial security as well as that of your family.”
While local laws (and prenuptial arrangements) are going to govern how debt and divorce impact your wealth more than keeping your accounts separate will, there is definite value in entering into any long-term relationship with clear goals for your wealth — and setting up your financial accounts accordingly.
Consider Your Risk Appetite
Risk appetite, or risk tolerance, is how much uncertainty you’re willing to handle in order to achieve your investing goals. This easy quiz from Rutgers University can help you determine where your risk tolerance falls on the scale from low to high.
No matter what your appetite for risk currently is, Carol Tompkins, Business Development Consultant at AccountsPortal, has a piece of advice that will apply to most investors: “For ordinary people to protect their wealth, they need to adjust their risk appetite as they grow older,” Tompkins said. “This means investing in less risky assets as one grows older. In addition, it is imperative to have a well-balanced portfolio from the very start of your investment journey for protection and maximum returns.”
Try a Trust: A Legal Tool for Wealth Protection
A key element of the estate planning process, trusts are legal entities that can be assigned possession of your assets so that you no longer technically own them but, in many cases, are still able to guide how they’re used both during and after your lifetime.
Trusts are a great wealth protection tool because they enable you to adhere to Carol Tompkins’s sage advice to “Own nothing personally.”
When you personally own fewer assets — think homes, cars, valuables, investments, savings accounts, etc. — there’s less risk of creditors or any nefarious characters sniffing out and coming after your wealth. Plus, if you get sued, any of the possessions that are owned by a trust instead of by you can’t be taken away as a result of the legal proceedings. Even after death, a trust will continue to protect your wealth by keeping assets out of probate court so they can be peacefully and privately passed down to the heirs of your choosing.
There are plenty of different types of trusts, including domestic asset protection trusts, marital trusts, charitable remainder trusts, etc. But what’s most important is which category a trust falls into: Revocable or irrevocable.
Revocable trusts, which are also commonly referred to as “living trusts,” allow their creator to retain control of the assets in the trust and even change (or dissolve) the trust itself during their lifetime.
On the other side of the coin are irrevocable trusts, which cannot be updated once they go into effect and take full control of the assets assigned to them. This kind of trust offers the most benefits when it comes to minimizing estate taxes, debt collection, and other threats that aim to eat up your wealth as it’s passed from generation to generation.
If you’re not sure which type of trust is best for you, we agree with Brian Martucci’s advice to consult with a legal professional when it comes time to create your trust: “Trusts are important estate planning tools that can help middle- and upper-middle-class folks avoid the costly, time-consuming probate process after death. They’re even more helpful for wealthy individuals who’d otherwise be liable for federal estate taxes after death. Revocable trusts are the most common type of trust used for estate planning purposes, but you’ll want to consult an estate planning attorney before making any decisions.”
To learn more about how a trust can protect your wealth and how to kick off the process of setting one up, check out our guide Trusts: How to Create a Trust and How Trusts Work.
We’ve said it before and we’ll say it again: One of the easiest ways to protect your wealth is to start planning, saving, and investing as early as possible.
While starting early is certainly a recognized strategy for building wealth, it’s also a great way to develop financial padding and get your assets in a place where they’re secure and able to generate further wealth in the years to come.
When it comes to investments specifically — and you should have some in order to diversify and protect your wealth as we mentioned earlier — time is of the essence.
“Begin investing early, in whatever amount you can,” said Brian Martucci. “This isn’t a revolutionary tip by any means, but it’s often framed as a means to ensure growth rather than wealth protection. Here’s the thing, though: Any wealth you’re able to save and invest responsibly, rather than spend on frivolities, is wealth that’s going to cushion you for whatever comes next.”
Track and Optimize Every Asset with Kubera
While we think all of the above wealth protection tips are valuable, we have to admit that keeping up with all your diverse new assets and strategies isn’t something that you’re going to be able to do with any old portfolio tracker.
In fact, that’s why we created Kubera — a modern wealth management platform with a focus on monitoring and optimizing a wide variety of asset classes and currencies.
Kubera is as easy to use as any spreadsheet and allows you to track your bank, brokerage, and cryptocurrency accounts. In fact, here you can see the full list of the banks, brokerages, crypto exchanges and wallets, and financial institutions to which Kubera connects.
In addition, Kubera’s unique beneficiary management and safe deposit box features ensure the safe storage and transfer of your entire portfolio of assets — including important legal documents like trusts and wills — to a beneficiary you designate.
Sign up for a monthly or yearly Kubera subscription right now. Or, if you’re a financial planner or interested in working with Kubera with help from your financial planner, contact us to learn more about our white-label option!