There are many types of investments where you can invest 1 million dollars or more and give you good returns long term. However, first, you have to think about what your goals are. Are you looking for Income, Growth, or both? Whatever is your answer there is something that your assets should always have, and that is Protection.
I have structured 4 steps so you can understand better how to manage and invest a 1 million dollar portfolio whether you are looking for income or growth.
Step 1: Protect Your Assets
This is the most important step of the 4, it is not only about investing and growing your assets, also you must keep them protected from any money-grabber out there.
Nowadays it has become a business to sue high-net-worth individuals in order to get what they’ve worked really hard in life. So, your first and most important step if you have more than 1 million dollars in assets is to protect them. There are many ways to protect your assets, from setting up a trust, creating a company that manages your assets, contributing to protected retirement plans, all the way to buying annuities. Not all of them are appropriate for every person, so that’s why it is important to check for suitability with a professional.
Keep in mind that there are people out there making a business out of this, having said that, it is crucial that you protect your assets as soon as possible. Nevertheless, after you have protected your assets properly, you still have to keep in mind that part of the protection process has to be to buy proper insurance for you or your business in case of any sudden threat.
Step 2: Define Your Goals
When defining your goals you have to take into consideration the Timeline & Risk associated with your investments. We recommend you to have a long-term or lifetime plan that you can rely on, as well as defining your risk at the beginning of the planning process in preparation for your investment goals.
Planning for Growth
If you have accumulated a considerable amount of money but want to keep it growing, there might be some potential tax benefits if you decide to grow your assets through equity. The majority of growth stocks reinvest their profits in the company rather than pay them to inventors as dividends, this might help you mitigate some tax obligations since taxes on the appreciation of value are deferred until you sell the stock.
Planning for Income
One of the common issues when managing a high net worth portfolio is the taxation on income. One of the most common ways to be taxed as Capital Gains is through dividend income, however, it can get a little bit tricky depending on whether you are retired or still receiving a high income.
In the table below you can see the qualified dividend income tax rate:
|Taxable Income||Tax Rate on Qualified Dividends|
|$0 to $40,400||0%|
|$40,401 to $445,850||15%|
|$445,851 or more||20%|
|Taxable Income||Tax Rate on Qualified Dividends|
|$0 to $80,800||0%|
|$80,801 to $501,600||15%|
|$501,601 or more||20%|
Note: Remember that for dividend income (for stocks) to be qualified, shares must be held for 60 days before the ex-dividend date.
This is just an example of the benefits of receiving qualified dividend income and how it can help you reduced your tax bill. However, if you are in a high tax bracket and want to reduce your tax bill this strategy may not be entirely appropriate for you.
There are more sophisticated tax-efficient strategies that we use with our high-net-worth clients looking for income from their wealth. Feel free to contact us below for more information on this matter.
Planning for Both
Plenty of advisors limit their clients with one of the two options (Income and Growth), however, our extensive experience in the markets has shown us that aiming for both is totally feasible. Having a well-structured diversified portfolio is key when accomplishing both of these goals as well as applying proper rebalancing strategies to your every year.
Depending on what stage of your life you are at the moment, you can potentially put a trigger on what you want for the future. If you are still young and have built some wealth, you might be looking to grow it for the future. If you are retired or close to retirement you might be looking to preserve your wealth and at the same time enjoy the fruits of your hard work for the rest of your life. In any case, we can definitely help you achieve your goals for the future and at the same time help you plan for your legacy and estate planning objectives.
Step 3: Plan For Your Investment Goals
Having a plan as high net worth individual should be another crucial step of your portfolio creation process. After you’ve defined your objectives, the next step to take would be to get all the numbers right and create different projected scenarios that represent how your assets might perform in the future, after that you will be more confident and will be able to choose the one that better meets your goals.
There are many types of ways to create portfolios that can generate income and growth, as a result, you do not have to necessarily toe the line with just one. That’s why having a well-structured investment plan can provide you with the peace of mind that you will potentially generate income and still grow your wealth for the legacy of your heirs.
Step 4: Tax-Efficient Investments
Whether your goals are investing for growth, income, or both, it should be of high priority for your investments to be tax-efficient. Several advisors out there only have the experience to allocate funds for people under 500k portfolios, with generic approaches such as 60/40, 70/30, or 40/70 allocations, which are not bad, but at the same time, they might not be enough for someone with assets over 1 million dollars. Your asset allocation plan should not only be directed to your risk but also to your investment goals.
Creating an Estate Plan for 1+ million portfolios is key if one of your goals is to create a long-lasting legacy for your loved ones. Make sure to create a well-defined Estate Plan
As we mentioned above the first and most important step is to protect your 1+ million dollars portfolio, after that, creating a plan for your specific goals is the smart thing to do, keep in mind that when selecting investments for your 1+ million dollar portfolio it is important to consider all the tax and non-tax factors that can affect your asset, that’s why allocating your assets in well-diversify and tax-efficient portfolio is key to get to your desire investment goals.
Time is a crucial factor if you want to invest 1 million dollars or more today, the sooner you have a plan the less risk your money will have. That’s why we encourage you to take action now and contact us for a complimentary meeting with our Certified Financial Planner, see if you are qualified, and start planning for your future.