Experts: 3 Different Approaches to Wealth Management You Should Know
Written by
Caitlyn Moorhead
Edited by
Amber Barkley
Commitment to Our Readers
GOBankingRates' editorial team is committed to bringing you unbiased reviews and information. We use data-driven methodologies to evaluate financial products and services - our reviews and ratings are not influenced by advertisers. You can read more about our editorial guidelines and our products and services review methodology.
20 Years
Helping You Live Richer
Reviewed
by Experts
Trusted by
Millions of Readers
Anyone who tells you that navigating the complexity of the current financial landscape is easy or that there is just one path to take may not have an investment philosophy worth following.
While no single method or wealth management service fits all in the United States, understanding different approaches can help you make informed decisions that align with your short-term and long-term financial objectives. Whether you’re a novice when it comes to Wall Street or just want to see your assets managed more profitably, there is, in fact, a different approach for different folks.
From risk management to sustainable investing, experts like Warren Buffett, Mark Cuban and Tony Robbins recommend a variety of strategies, products and services that cater to a broad range of needs. Here are four wealth management approaches that stand out.
Warren Buffett: Forming Healthy Money Habits
According to Buffett, forming positive money habits is the first step to accomplishing more successful and traditional wealth management strategies. In 2007, at the University of Florida, he said, “Most behavior is habitual, and they say that the chains of habit are too light to be felt until they are too heavy to be broken.”
This approach to financial planning involves developing a broad, personalized strategy encompassing various aspects of personal finance, including investments, estate planning, tax management and retirement planning.
Your own financial advisor could work with you to build a portfolio that balances risk tolerance with long-term objectives. Here are a few key ways investment advisory services can help with managing your wealth and habits.
- Asset allocation based on individual risk profiles
- Estate planning to preserve wealth for future generations
- Retirement planning with a focus on stability and growth
- Tax-efficient strategies to minimize liabilities.
Mark Cuban: Avoid Investments You Don’t Understand
Sometimes the best wealth management approach is avoiding taking missteps or stepping too far outside your risk tolerance level. Not understanding what you are investing in can be just as dangerous as throwing money away.
This form of financial gambling is frowned upon by a money expert such as Mark Cuban, who wrote in a 2010 blog post, “If you don’t fully understand the risks of an investment you are contemplating, it’s OK to do nothing. In times of massive uncertainty like we are facing today, doing nothing is a valid and IMHO preferable investment strategy. Just put money in the bank.”
Having your money in an FDIC-insured bank account is a safe option until you feel more equipped to make the right investment decisions. You can also seek the counsel of expert financial advisors, who can help guide you through a more profitable investment strategy.
How Robo-Advisors Can Help
As digital technology transforms industries, robo-advisors have gained popularity for their low-cost, automated approach to wealth management. Though you may have to pay advisory fees, these platforms and investment products use algorithms to create and manage portfolios based on client preferences, such as risk tolerance and time horizon.
This approach is best for you if you prefer a hands-off method and a cost-effective alternative to traditional financial advisors. While robo-advisors may not offer the in-depth customization of traditional methods, they provide a streamlined option for those seeking simplicity and convenience without the high costs.
Tony Robbins: Don’t Forget To Diversify
You never want to put all of your nest eggs in one basket, and financial giants like Tony Robbins would tend to agree. In a blog post, he wrote, “Spreading your money across different investments decreases your risk and increases your upside returns over time.”
Diversifying across securities, retirement accounts, asset classes, markets or even high-yield savings products can only enhance the wealth you are growing.
For high-net-worth individuals or those looking for more advanced strategies, alternative investments present an opportunity to diversify beyond traditional assets like stocks and bonds. This approach includes investing in assets such as private equity, real estate, hedge funds, commodities and even art or collectibles.
The goal is to reduce portfolio risk and increase returns by incorporating investments that don’t necessarily move in sync with the stock market. The following are examples of alternative ways to invest:
- Real estate for steady cash flow and asset appreciation
- Private equity for potential high returns
- Hedge funds for unique investment strategies
- Commodities to hedge against inflation.
While alternative investments can provide significant rewards, they also come with higher risks and require specialized knowledge. Investors should approach these options with caution and consider them as part of a diversified portfolio.
Final Take To GO: Choosing the Right Wealth Management
The bottom line is that wealth management is highly personal, and the right approach depends on factors like your financial goals, risk tolerance and investment timeline. While traditional financial planning offers a solid foundation, the rise of robo-advisors and alternative strategies provides new opportunities for you to manage your wealth and assets in ways that align with your values, aspirations and ultimate financial goals.
By taking the time to research and understand different wealth management approaches, you can take control of your financial destiny and better navigate the ups and downs of the ever-volatile economic climate. Whether you’re seeking simplicity, sustainability or diversification, look to the advice of financial experts like Buffett, Cuban or Robbins to follow the path to success they have taken.
More From GOBankingRates
