{"id":6254,"date":"2013-04-24T07:16:22","date_gmt":"2013-04-24T14:16:22","guid":{"rendered":"http:\/\/www.marketriders.com\/investing\/?p=6254"},"modified":"2016-12-21T07:30:39","modified_gmt":"2016-12-21T15:30:39","slug":"what-wealthy-investors-know-about-lowering-investment-risk","status":"publish","type":"post","link":"https:\/\/www.marketriders.com\/investing\/what-wealthy-investors-know-about-lowering-investment-risk\/","title":{"rendered":"What Wealthy Investors Know About Lowering Investment Risk"},"content":{"rendered":"

The popular image of a “one percenter” in America is the uber-connected\u00a0Wall Street\u00a0shark, a banker with few morals and\u00a0no compunction about making money at the expense of others<\/a>, even his own clients.<\/p>\n

Those people exist, but the very wealthiest people in the country actually hail from a mix of economic sectors and professions, including retail, energy, media, sports, hotel management and real estate.<\/p>\n

Some actively manage their affairs after having built businesses over decades. Others are heirs or second-generation owners.<\/p>\n

\"lowering<\/a><\/p>\n

You might think that these select few have\u00a0access to every secret in the universe<\/a>\u00a0\u2014 the best hotels, private clubs, inside opportunities and experiences.<\/p>\n

And they do, frankly. Being rich brings one all kinds of access.<\/p>\n

What it doesn’t bring in any way, shape or form is power over the markets. Unless they cheat or set up a monopoly \u2014 for good reason illegal pursuits \u2014 the rich have to invest pretty much the way the rest of us do, on the open markets.<\/p>\n

The occasional IPO or corporate stock benefit might come their way, sure, but mostly they own bread-and-butter stocks and bonds like everyone else. Lowering investment risk matters to them.<\/p>\n

Perhaps unsurprisingly, the richest have begun to figure out that nobody has a lock on what the market will do next. After decades of overpaying for advice that fails to deliver, many of them are\u00a0looking for ways to keep up efficiently<\/a>.<\/p>\n

A\u00a0recent survey published in\u00a0Worth<\/em>\u00a0online<\/a>, for instance, points out that 37% of high-net-worth individuals said that they have begun to adopt the investing principles of universities and pension funds. That number, reportedly, is a huge jump up from past survey results.<\/p>\n

Passive investing offers the already-rich a steady return with less risk and, ultimately, lower costs. No more silk ties and crumpets served with tea at the financial advisor’s oak-paneled offices.<\/p>\n

Somebody is paying for all those crumpets, and they figured out who: Investors themselves, in the form of fees.<\/p>\n

The simple beauty of the endowment and pension fund method for lowering investment risk\u00a0is that there’s no heavy lifting: no stock-picking, no teams of analysts poring over spreadsheets looking of mispriced opportunities.<\/p>\n

In fact, it’s just knowing the right mix of asset classes to create a proper level of risk and reward, then having the discipline to rebalance along the way. Volatility drops, returns smooth out and, crucially, fees fall to a fraction of typical active management costs.<\/p>\n

Lowering investment risk matters<\/h2>\n

The fees are the problem. An active manager in a mutual fund will take, typically, anywhere from a third to half of a retiree’s gains over the decades of “helping” them reach retirement.<\/p>\n

It’s a\u00a0fundamental flaw of the mutual fund industry<\/a>, one that all investors should recognize.<\/p>\n

Lowering investment risk is not about buying fixed income or putting money away in CDs or money markets. It’s about finding a balance of risk and return in various asset classes at a cost that’s appropriate and, above all, effective.<\/p>\n

With the\u00a0extra 30% in your retirement account<\/a>, you can buy your own crumpets.<\/p>\n","protected":false},"excerpt":{"rendered":"

The popular image of a “one percenter” in America is the uber-connected\u00a0Wall Street\u00a0shark, a banker with few morals and\u00a0no compunction about making money at the expense of others, even his … Read more →<\/span><\/a><\/p>\n","protected":false},"author":8,"featured_media":6255,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_wp_rev_ctl_limit":""},"categories":[8],"tags":[],"yoast_head":"\nWhat Wealthy Investors Know About Lowering Investment Risk | MarketRiders.com<\/title>\n<meta name=\"description\" content=\"Lowering investment risk is not about buying fixed income or putting money away in CDs or money markets. 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