I was having a conversation with a person recently who had come into a rather significant amount of wealth a few years ago.

I asked him what his experience had been holding on this amount of money which came overnight. He shared that he was worried about how he was going to manage it. If done right, he knew that he would be able to live well, and have enough left over for his children as well. However, if there were mistakes made, he knew that he would be the one known to be responsible for the downfall of the asset.

This was when I realized that holding on to significant wealth can be a pretty stressful exercise by itself. And since he did not know better what to do with it, most of it was left in the bank account and he took out a small portion to be invested into stocks that he was familiar with and unfortunately, Singapore Airlines was one of those bought before the covid 19 crisis. He was stopped in his tracks in decision making, for not wanting to make a BIG mistake but he knew he needed help so he was referred to us.

The first key priority was for preservation of wealth. With great power comes great responsibility so we needed to ensure that this cannot go down to zero. Holding on to single equity stocks will not fit this due to the fact that single companies can potentially get delisted or the business can close suddenly without time to react due to unforeseen circumstances and you can have a large allocation to a single company. One of the ways we do this is to diversify into 14,000 companies all across the world. This minimizes our risks to a bare low point. It is almost impossible for all companies to close all at the same time. In fact, in all periods, crisis or not, there will still be some other companies that can be doing extremely well. One example is the some of the technology companies that thrived during the covid 19 crisis.

Focus on what we can control

We will not be able to control markets and the outcome of it but we can control our human behaviour towards the circumstance in front of us. We can also control our asset allocation to the risk appetite that we are comfortable with depending on our time horizon of our goals and milestones that we need the money. We can also control where we position our investments. By tilting towards the evidence-based strategies of having smaller, reasonably priced and higher profit companies, we are able to get a higher outperformance of our investments over time with the opportunity to be able to rebalance it on a regular basis. We also focus on the fact that globally diversified portfolios have given disciplined investors exceptional returns over the almost hundred years of investing. We know that the markets move upwards in a trendline, but we have to expect that there will be unexpected ups and downs in the markets for some of the risk we are taking and it will be within his acceptable temporary risk.

Work with an experienced advisor who understands you and keeps you in check

Staying disciplined in extreme volatile conditions is also a critical component of human behaviour and working with an experienced advisor who has encountered this before to give you specified assurance of your goals and objectives will give you peace of mind.

You can always start by having a conversation to see if there is a fit for who you are looking for and if the financial advisor is a fit together to journey with you. Not all advisors may be right for you and not all clients may right for the advisor. The important thing is that there should be a match.