5 Ways to Protect Your Wealth During Periods of Market Volatility

When markets are unpredictable, it can feel like your financial security is at the mercy of forces beyond your control. As a high-net-worth individual, you may be seeking the best ways to protect and nurture your hard-earned wealth when markets are volatile and unpredictable. 

While you can’t control the financial markets, you can control how you invest your assets and respond to various economic scenarios. Whether you’re considering switching financial advisors or exploring the best way to fine-tune your retirement plans, these five strategies provide a blueprint for your long-term success.

Implementing defensive strategies and working with the right financial advisor in Connecticut are several time-tested ways to stay on track for achieving your goals and making sound decisions that protect your financial future.

1. Work with a Fiduciary Financial Advisor with an AIF Credential

Selecting the right financial advisor is one of the most important decisions to protect your retirement assets. Just like no two investors are the same, neither are financial advisors. Plus, with so many options available, you might wonder about the qualifications that impact the quality of financial advisors. 

As a high-net-worth individual, you should consider working with a fee-only financial advisor in New Haven, CT, or a fiduciary financial advisor in Woodbridge, CT, who holds an Accredited Investment Fiduciary (AIF®) designation.

Here’s why. The AIF® designation signifies that the advisor has had fiduciary training and is always required to put investor interests ahead of their own—a critical factor for investors seeking high-net-worth retirement planning services. Unlike traditional brokers and insurance agents who might have competing interests, an advisor with AIF® credentials must provide unbiased advice. This level of professionalism is invaluable when navigating volatile markets.

If you’ve been thinking about changing financial advisors or are seeking an advisor for the first time, now is the time to ensure the financial advisor you select has the necessary experience and credentials to help you achieve your financial goals.

2. Create a Robust Retirement Plan That Anticipates Volatility

Markets have always gone up and down—that’s inevitable with the rise and fall of economic cycles. But, the key to protecting your retirement is not to panic during downturns. Instead, create a comprehensive retirement plan that converts this risk into a buying opportunity when securities prices are lower. Your ideal retirement plan should be flexible enough to adapt to market fluctuations, ensuring you stay on track regardless of the rise and fall in future securities prices.

Here are some of the components that a retirement plan should include: 

• Asset Allocation: Diversifying your investments across different asset classes (stocks, bonds, real estate, commodities) helps cushion against market swings that may have a greater impact on more concentrated portfolios. For example, while stocks might decline in value during periods of inflation, income-producing real estate can increase in value. 

• Income Strategies: It is essential to have a plan for generating income during retirement. High-net-worth retirement planning requires investment strategies that include a mix of dividend-paying stocks, interest-paying bonds, or real estate investments that provide dependable income streams.

• Tax Efficiency: Minimizing taxes is another important consideration, particularly during decades of retirement. Taxes are a form of erosion like any other expense. And, every dollar of expense is one less for your future use. Proper tax planning ensures you keep more of your hard-earned wealth for you and your family. Fee-only financial advisors in New Haven, CT, are well-versed in designing tax-efficient strategies, helping you make smart decisions regarding tax-efficient retirement distributions.

How do inflation and high prices affect your retirement strategy? Watch our founder, Paul Schatz, discuss the impact on your retirement plans.

3. Diversification: The Bedrock of Risk Management

When markets are turbulent, selling all or part of your portfolio and waiting for a turnaround can be tempting. But timing decisions like these can be very difficult. Instead, diversifying your portfolio is one key to weathering market volatility and reducing your risk of large losses.

Diversification isn’t just about spreading your investments across different sectors of the economy, geographies, and types of securities. It’s about spreading your risk across various asset classes that react differently to various market conditions. 

High-net-worth individuals may want to consider the following:

• Global Investments: International markets may perform differently than domestic markets, providing a layer of protection against downturns in U.S. markets.

• Alternative Investments can include real estate, private equity, commodities, or hedge funds. These investments may not have high correlations to the performance of the U.S. stock markets. This can provide a buffer during market downturns.

• Fixed-income Investments: Bonds or other fixed-income securities can offer more stability due to their greater emphasis on income, helping to balance the risks associated with more volatile investments like stocks.

4. Focus on Income Generation and Sustainable Withdrawals

One of the biggest challenges in retirement planning for high-net-worth individuals is ensuring their wealth lasts a lifetime. This becomes especially challenging in volatile markets, where asset values fluctuate daily. That’s why focusing on income generation and maintaining sustainable withdrawal rates can be critical.

For example, a popular investment strategy is the “bucket approach,” which divides your retirement assets into different “buckets” based on when you may need income or principal. While the goal is to avoid emotional investment decisions, particularly selling during market downturns, some of the volatility can be offset by the investments of the more conservative buckets. 

• Short-term Bucket: This bucket contains relatively liquid assets like cash equivalents or very short-term bonds that are less volatile during market downturns. In our lexicon, this is called “conservative”.
  

• Intermediate Bucket: This bucket contains more volatile asset classes, like dividend-paying stocks or intermediate-term bonds. It can provide more income during the middle years of retirement. In our lexicon, this is called “balanced.”

• Long-term Bucket: This bucket holds more aggressive investments, such as value and growth stocks, that will appreciate over time and be used in later retirement years. In our lexicon, this is called “capital appreciation” and “aggressive growth.”

Watch our founder, Paul Schatz, discuss current market conditions.

5. Know When to Take Social Security

Social Security may be a small part of your overall retirement income due to your accumulated assets during your working years. Still, the money is owed to you, and timing can make a substantial difference in your strategy.

If you can delay taking Social Security until age 70, you can increase your benefits by about 8% each year after full retirement. This strategy can produce more income for your latter retirement years when you need it the most. 

There is another consideration. When most of your retirement assets are fluctuating in value. Social Security payments do not fluctuate. Payments increase every year based on inflation. Consequently, the monthly payments may be more valuable during periods of market volatility. 

On the other hand, if your short-term retirement plan is sound, delaying Social Security for as long as possible may be the right decision.

Working with a New Haven AIF® who understands your current circumstances and long-term goals can help you decide when to take Social Security as part of your broader retirement planning strategy in Connecticut.

Get to Know Heritage Capital

If you’re looking for a partner who will stand by your side and guide you through market ups and downs with expertise and care, consider working with Heritage Capital. Let us help you protect what you’ve worked so hard to accumulate. Connect with us to learn more about our retirement planning services.