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Wealth Preservation |
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At Aegean Wealth Management we have seen the phrase "wealth preservation" used in many ways.
We would like to define wealth preservation the way we understand and use it.
Wealth Preservation - Reducing the probability of sudden (catastophic) loss on wealth and protecting wealth from the subtle long-term effects of inflation. We implement wealth preservation as a two-step process. 1) Reducing the risk of a sudden (catastrophic) loss of wealth by using wealth structuring. 2) Protecting wealth from the long-term subtle effects of inflation by using investing. Wealth Preservation Vs Wealth Generation We would like to compare and contrast wealth preservation and wealth generation. We would define wealth generation as follows. Wealth Generation - Activities that generate money such as working in a highly paid profession, or being a successful entrepreneur. Notice we haves said nothing about wealth generation and investing in the same sentence. Many times investing is marketed by Wall Street as a way to make money (wealth generation). But research shows very few people can beat the various market indexes over time. And very few people can make a "killing" in options or some other exotic asset class. So we believe that any firm who markets Wall Street as a place to make lots of money money might be very interested to "take" your money. So once again we define wealth generation as money making activities like working in highly paid profession, or being a successful entrepreneur. We define investing as part of wealth preservation. The Wealth Preservation Mindset Vs The Wealth Generation Mindset Wealth preservation is a very different mindset than wealth generation. And different personality types could excel at wealth preservation but not wealth generation. For example, the motivated sales executive could have the drive to make lots of money and become very wealthy. But he might not have the discipline to structure the wealth properly and invest properly which is the wealth preservation part. And many times people who were great at earning lots of money ended up losing it. We feel our definition of wealth preservation leads to a very conservative approach. And rather than focusing about how much money we could make, we focus on how much money we could lose. So if you really want to get wealthy and stay wealthy, a good approach might be to work in a very high paying profession. And then learn how to preserve your wealth by structuring and investing it. Many people make a fortune, or inherit a fortune and lose it. Many people never make a fortune, but end up with some wealth in their old age. The best for most people is to focus on generating wealth and then preserving the wealth as they go. With a clean separation of duties between wealth preservation and wealth generation. The Opportunity Cost of Not Implementing Wealth Preservation If some catastrophic event happens, so much the worse. Because the opportunity cost of the lost capital is more years working and saving, that is, if there is an opportunity to work and save. And even if a catastrophic event never happens, the time spent being distracted and worried by the possibility of a catastrophic loss are an opportunity cost. Because that time spent being distracted and worrying was time you could have been generating wealth through your career, profession, or entrepreneurship. A good wealth manager will focus on your wealth preservation and help you structure your existing and future wealth. Because when you, the client do not have to worry about catastrophic losses or having enough in your golden years, you can focus more effecively on wealth generating activities. At Aegean Wealth Management we can help you understand and implement prudent wealth preservation. The sooner you start the better. |
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