Whatever your position, whether you are trying to preserve or enhance existing wealth or building fresh wealth strategy is key. As the old adage goes – if you fail to prepare then you prepare to fail. Your wealth will need to serve different purposes at different times in your life, and your wealth management strategy must reflect this.
It is absolutely inarguable that you need to be clear in your goals. Only through this can you make the right choices. Strategically speaking, the investment horizon that you are working to is one of the key things to decide upon. Regular returns may or may not be priority as well. Because you needs and circumstances change over time, you need to be aware of this.
When you break it down the concept of ‘wealth’ serves several purposes. Wealth preservation is all about maintaining 
the value of capital, whilst simultaneously providing a reasonably stable source of income. Wealth enhancement on the other hand is all about growing wealth at real terms, but not risking capital to a large extent. These contrast with wealth generation, where, to use a poker analogy, you need to put more of your chips into the middle.
Coutts quote an interesting static on their investment management page: in the top 5% of US pension fund results asset allocation was responsible for 77.5% of returns. Choosing the correct composition of a portfolio is at the heart of getting the returns you would like. Picking selection from across the spectrum of asset classes across a range of markets is good practice in investment management.
All investment carries inherent risk. Understanding an managing risk is essential to wealth management. The three main forms of risk you need to calculate are volatility risk, liquidity risk and shortfall risk. Volatility risk is the risk that in the short term there will be large swings in asset prices – hitting portfolio value. You may not have instant access to your money at the time you need it with some investments – this is what the term liquidity risk refers to. The risk you will want too be most averse to exposure to however is shortfall risk – that the investments do not satisfy income and capital growth objectives.
Picture credit: hdptcar (Flickr)
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