What is Wealth Preservation and How Does It Work?
Being wealthy comes with a lot of responsibilities. You may think that everything will be easy for you once you become wealthy. But like any other people in the world, rich people face different problems, and one common problem is managing and preserving their wealth.
In hindsight, being wealthy does not only mean buying luxurious cars, designer bags, or buying multiple properties. It is also about attaining the financial goals you have set for yourself and having financial freedom on anything that matters to you. These different types of wealth that you can accumulate can be hard to maintain.
Previously, we talked about wealth accumulation and why it matters to you. In simplest terms, wealth accumulation is about planning the measures to generate wealth to reach your financial goals. Wealth accumulation aims to provide for your loved ones and prepare for anything in your life.
We now know how vital wealth accumulation is, as it secures a promising future for you. At the same time, wealth accumulation can diversify your wealth to different investments so that you can utilize your wealth even more.
And maybe, now that you are earning from your efforts in following the different strategies in wealth accumulation, you have come to realize, how will you preserve the wealth you accumulated? How sure are you that the wealth you have now will be the same in the next few years?
In wealth preservation, consistency is the key. Let’s find out more about wealth preservation.
What is Wealth Preservation?
Wealth preservation refers to protecting assets such as your cash, stocks, and bonds from a drop in value. It is often combined with wealth creation, where both tactics are used together to better cope with market volatility.
The concept and importance of wealth preservation have been talked about for decades, but why discuss it now? The reason is the economy. It seems to be a focal point in the news, with each new day bringing challenges for many people struggling to hold onto their jobs and pay their bills. This issue is critical to address because it affects everyone in different ways.
For starters, inflation can instantly dictate the state of your wealth. When a country faces an economic crisis, prices drop, and your investments will be highly affected. Once an economic crisis hits, it can be challenging to control your assets. In the worst-case scenario, you’ll lose a lot of money trying to maintain the assets you accumulated.
Losing your assets is one of the biggest nightmares you can ever think of, and honestly, no one wants to no one wants to be in that terrible situation. To prevent this, you have to be prepared for every crisis that may affect your wealth. And you can prepare if you know how to preserve your wealth. Wealth preservation is all about keeping your wealth by using investment techniques that protect it from loss.
How to Preserve Your Wealth?
We now know how to accumulate wealth, and in simplest terms, to preserve your wealth, you need to think of the opposite of wealth accumulation. There are many strategies and techniques you can do to preserve your health, and let’s have a look at these strategies.
Diversify your Wealth
Investing is like tossing a little bit of your hard-earned money in the ocean. You’ll never be able to tell which waves will come back and give you a good ride or which ones will leave you gasping for air. If you diversify your wealth correctly, you can quickly minimize your risk exposure.
You have to make sure that your wealth is equally divided. Invest a certain amount of money that you can afford to lose and save money on things you want to invest in long-term. In diversifying your wealth, you eliminate the risk of losing everything once a crisis hits. At the same time, this gives you the leverage to try all investing strategies. Again, only invest a certain amount of money that you can lose.
Create a Passive Income or Investment
You also have to invest in companies that can make you generate a passive income. You can generate the active income you have to pass by involving your wealth in different companies.
Investing in stocks that pay dividends can be a way to create a passive income. But take note that being an investor in a company does not mean you will guarantee the company’s success, and you still have to be ready for fluctuations. As they say, “let money do the work.”
Set Your Priorities
If you cannot afford to invest in different assets and want to preserve wealth according to your current lifestyle, it is time to set your priorities. Ask yourself, what are the things you want to achieve with your wealth? What are the risks you want to avoid?
Knowing where to invest is not enough. You also have to know your goals with your investments and understand the risk tolerance. Every possible investment you will get has to have a goal that will benefit you financially, and it may be for your career, health, business, and more.
Control Your Expenses
Let’s say all your investments are successful, and you managed to accumulate a lot of active and passive income; the number one thing you should not do is to spend it recklessly. Even if you outperform the market, you should spend all your earnings strategically.
You can do this by adjusting your financial expenses annually. What you may need this year may not be essential next year. Sometimes, the economy will improve next year, so it will be wiser to invest next year. Always watch out for the market and spend on things that will benefit you in the long run. This method can also be called “dynamic spending”.
However, do not stop yourself from buying the things you want for yourself. You can always spoil yourself occasionally. But when it comes to buying luxurious items, make sure that it will be a good investment in the long run.
Learn About Wealth Management
Wealth management is a comprehensive service that assists mid- to high-net-worth clients in growing their money, managing their liability exposure, and devising ways to pass their wealth to the next generation. Rather than working with an advisor who focuses primarily on financial planning or investment management, wealth management services take a holistic approach to the financial condition of high-net-worth clients.
These are the standard services related to wealth management:
- Tax planning and accounting services
- Tax Management
- Comprehensive Financial Planning
- Estate Planning
- Philanthropic Planning
- Legal Services
- Investment Management and Advice
- Retirement Planning
If you cannot afford to hire a wealth manager, you can manage your wealth independently. Nowadays, there are different money tracker applications or spending tracker applications that you can use to control and assess your expenses. At the same time, there are different journal templates that you can use to track your expenses. In that way, even if you have a small income, you can still manage your wealth towards your financial goals.
Championing a Secured Future
Wealth management is the best thing you can learn and explore to help you with your financial goals. It has many ins and outs, and it is not easy to explore instantly. But as they say, learning never stops, and as you continue your journey on wealth management, you’ll realize how important it is to your life.
But the one great takeaway that you can get from this is that it is much better to invest than spend. Remember, time is one of the greatest assets you can have, and time passes quickly. If you do not seize the opportunity to learn about wealth preservation, you may regret it later on.
To know more about wealth accumulation, wealth preservation, wealth management, and more, consult your trusted financial advisor in the area. You can also visit our website and sign up for our future events to know more.
The views and opinions expressed in this article are solely that of the author and do not reflect the opinion of Professional Investment Advisory Services Pte Ltd. The information contained in this article is for general information only and does not constitute the provision of financial advisory services. The precise terms, conditions and exclusions of any services or products mentioned are specified in their respective policy contracts. For customized advice to suit your specific needs, consult an Apex Financial Advisor Representative
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Apex Private Wealth Management is an authorised group of Financial Adviser representatives from Professional Investment Advisory Services Pte Ltd
1The Business Times. (2021, May 28). How to preserve wealth for your loved ones amid a pandemic. The Business Times. Retrieved March 10, 2022, from https://www.businesstimes.com.sg/wealth-investing/how-to-preserve-wealth-for-your-loved-ones-amid-a-pandemic
2Hightower, S. S. (2021, June 2). Lasting Legacy: Key Strategies To Preserve Wealth. Forbes. https://www.forbes.com/sites/bnymellonwealthmanagement/2021/06/02/lasting-legacy-key-strategies-to-preserve-wealth/?sh=2132fe3e4ab8
3Jennings, J. (2021, June 30). Preserving Wealth Is A Very Different Discipline Than Creating It. Forbes. https://www.forbes.com/sites/johnjennings/2021/06/30/preserving-wealth-is-a-very-different-discipline-than-making-it/?sh=23d216e64480
4Wohlner, R. (2021, November 23). What Is Wealth Management And Do You Need It? Bankrate. Retrieved March 10, 2022, from https://www.bankrate.com/investing/what-is-wealth-management/