Investment Management for High Net Worth Individuals

high net worth senior couple looking at tablet with financial advisorHigh net worth individuals face a different set of opportunities and challenges. Their greater wealth means they can access more investment options, but with higher net worth also comes more complex investment management. Investment management can be particularly complicated for early retirees who may rely on their wealth to sustain their standard of living for many decades throughout retirement.

Wealth, like early retirement, can be a blessing, but only if you approach it with the right care and planning. How you manage your investments can make or break your retirement dreams. 

This guide looks at some of the key elements of investment management for high net worth individuals in Arizona and nationwide. The team at Watts Gwilliam & Company answer some of the most common questions wealthy investors have, from when to sell investments to what to buy and how to choose the right investment strategy for your retirement.

High net worth individuals we commonly work with at Watts Gwilliam & Company include professional athletes and high-income-earning business owners. If you fall into one of these categories, check out our new guides: 

Financial Planning for Professional Athletes 

Financial Planning for Business Owners 

If you have a question that is not addressed here, let’s talk! A quick conversation can have a big impact. 

Chapter 1

When to Sell

Determining the right time to sell your investments can be tricky, as it’s often the opposite of what your gut may tell you. When markets are volatile, we watch many DIY investors panic-sell, getting rid of investments without revisiting their long-term goals or considering what the market could do in the near future. When markets are good, it’s common for investors to keep things status quo, often hanging onto stocks too long, ultimately winding up with overconcentrated stock holdings. 

When you enter retirement, the decision of when to sell can become even more complicated. 

Once you retire, your portfolio transitions from an accumulation vehicle to a distribution one. You’re now relying on income from your investments to cover your expenses. Selling an investment at the wrong time could not only cost you money but also disrupt your entire investment strategy and put your future returns at risk. A portfolio that’s liquidated too early has less ability to provide the growth you may need to sustain you throughout retirement.

What you don’t want to do is sell an investment just because it hasn’t performed well. The truth is, different market sectors will perform better in different environments. It’s natural for parts of a portfolio to lag while others thrive. 

You also don’t want to sell out of fear. Investing shouldn’t be driven by emotional decisions. If fear of market turbulence or other events is pushing you toward the sell button, reach out to a financial advisor to get more objective advice.

That said, there are several reasons when it does make sense to sell an investment. First and foremost for retirees is to generate income. Your retirement withdrawal strategy should dictate when and how much of your investments you’ll sell each year during retirement. At Watts Gwilliam and Company, we can stress test your withdrawal strategy before you enter retirement to help ensure you won’t run out of money in retirement.

You may also want to sell an investment to rebalance your portfolio. It’s natural for a portfolio to drift from its target asset allocation, as certain sectors of the market will grow during different times of the economic cycle. Make sure to review your portfolio on a regular basis and rebalance if necessary.

Why Diversification is Important: Financial Advisor in Gilbert Explains 

How to Turn Concentrated Stock Holdings into Income Generators

Chapter 2

What to Buy

What you invest in is a personal decision and should be based on your individual financial needs and goals. This is perhaps the most important thing to remember when choosing what to buy. The right investment for you is likely not what’s right for your neighbor or what’s getting the most attention in the media, because no two financial situations are exactly the same. 

When choosing investments for your portfolio, don’t be swayed by hot trends or watercooler gossip. Instead, think only of yourself. 

  • What are your goals for your money? 
  • Is this a short-term investment or one you plan to hold for the long-term? 
  • Are you comfortable taking on more investment risk or do you prefer a safer strategy?

When you enter retirement, you may be faced with new buying decisions. Throughout your accumulation years, you may have taken on more aggressive investments that could provide the long-term growth you needed to reach your financial goals. Now that you’re in retirement, you may have different goals for your portfolio, such as income and capital preservation. Work with a financial advisor to create a strategy for how you’ll transition your portfolio from a growth-oriented one to a one more suited to your new financial needs.

Why Low Prices Can be a Good Thing: Investment Advisor in Gilbert Explains

Chapter 3

Investment Strategies

One of the biggest questions facing early retirees is how to make their money last. With life expectancies increasing in the U.S., retiring at the “traditional ages” could mean living for 20 or more years in retirement. If you retire early, you may be doubling that number. That’s a long time to be depending on your investments for income, making it that much more important to use the right investment strategy.

A common retirement strategy is the 4 Percent Rule. According to the rule, a retiree can withdraw 4 percent of his or her investment portfolio each year, adjusted for inflation, without running out of money over a 30-year retirement. However, retirement could last a lot longer than 30 years for early retirees. To compensate for this, you may want to use a more conservative withdrawal rate. 

Another challenge with the 4 percent withdrawal strategy is that it doesn’t take into consideration your lifestyle or your plans in retirement. Is 4 percent enough to live on? When you have extensive travel plans or dreams of relocating to an area with a higher cost of living, 4 percent may not make sense. To avoid having to change your standard of living in such situations, try to build flexibility into your budget. 

What You Need to Know About Rule 72t and Early Retirement

10 Investment Mistakes that Carry Big Effects

Chapter 4


Another challenge facing many early retirees is how to navigate volatile financial markets during retirement. We all got a stark reminder of just how bumpy the market can get in 2020. While it may be your natural instinct to sell in down markets, this is often a bad idea that can derail your long-term financial plan. 

When market turbulence makes you nervous, return to your financial plan. If you find yourself losing sleep at night worrying about the market roller coaster, it may be a sign that you’re taking too much risk in your portfolio. Talk to your financial advisor about incorporating more stable investments into your plan that won’t subject your portfolio – and you – to so many dramatic swings. Just remember that a conservative portfolio is less able to provide long-term growth, something early retirees may still need.

What Past Markets Tell Us About Volatility, Alternative Investments

Chapter 5

Risk Tolerance

Volatile markets are a great reminder of the importance of understanding your risk tolerance when investing. Risk tolerance is your capacity for taking investment risk. Someone who isn’t fazed by watching their portfolio lose 10 percent of its value has a high risk tolerance. On the other hand, if you start to feel anxious anytime your portfolio drops in value, you likely have a low tolerance for risk.

Think about how you respond to market turmoil. 

  • Do you have trouble sleeping when you think about your investments losing value? 
  • How far are you willing to watch your investments drop before you feel the need to get out of the market? 

Your financial risk tolerance may be very different from your risk tolerance for life in general. For example, just because you may enjoy skydiving doesn’t mean you’re comfortable with an aggressive investment strategy that puts your hard-earned nest egg at risk.

Keep your risk tolerance in mind as you develop your retirement investment strategy. While high net worth individuals may be able to afford to take more risks with their money, it doesn’t mean they have a high risk tolerance. Pushing yourself to take on more risk than you can tolerate can create unnecessary stress and be a lot more detrimental to your long-term returns than you may think.

What’s Your Financial Risk Tolerance?

What Type of Investor Are You? Peter, John, Mary or Sue?

Chapter 6

Alternative Investments for High Net Worth Individuals

If you’re a high net worth investor, you may want to use less traditional investment strategies in your portfolio. Alternative investments are any investment beyond the traditional investments, like stocks, bonds and cash. Alternative investments include real estate, hedge funds and private equity. Such alternatives can provide a good counterbalance to traditional investments, because alternatives can react differently to market or economic stimulus. They may zag when other investments zig. As a result, alternative investments can reduce the overall volatility in a portfolio.

Alternatives can also be more stable than stocks while providing higher yields than bonds, making them a good compromise for high net worth individuals who retire early and need income but don’t want to lose the potential for growth. These types of investments can also provide a hedge against inflation, such as with real estate, when values increase with inflation.

While these investments can provide many benefits, it’s important to note they also come with certain risks. Many alternatives have limited liquidity, making it harder to get into or out of the investment than with more traditional investments. They can also carry high management fees. It’s important to do adequate due diligence when researching and selecting alternative investments. High net worth investors may have more money than your average investor, but no one likes to lose money. 

At Watts Gwilliam and Company, we specialize in these alternative investments and are ready to help guide you through the investment process. For more on what this looks like, visit our website.

Understanding Alternative Investments: Financial Advisors in Gilbert Weigh-In