High Net Worth - Is Your Asset Allocation Acceptable?

[Andre1969]

Oh wow, in that case I guess even I am in that category. I don't know why but for some reason I feel imposter syndrome, like maybe others have much more than I do and I don't belong at that level of entry. Maybe that's the engrained saver mentality I have, though.

So since I fit the category, I am a little different since I am still very much in the game at 42. If I had "won the game" and mortality was closer, I might see some reason to reduce equity exposure. But honestly with DF at UHNW and us in HNW category, I don't see any downside risk to continuing at 100% equities.

Yeah, I kinda feel that way, too. If one of my friends or relatives was in the same financial situation as I am now, I would be like "WOW, you're going GREAT!!" But, for whatever reason, whenever I try to apply it to myself, I'm like Meh, whatever. It's almost like I have to step outside of myself and then look in, if that makes sense.

In the past, I always planned to live to 100, as a best-case scenario, so I figured that meant I'd always have to assume some degree of volatility along the way if I wanted to retire early. But now, I'm 54, and while that's not exactly "OLD," it's later than I think. Norman Fell was 9 days shy of 53 when "Three's Company" first aired, so Good Lord, I'm older than Mr. Roper!

At this point, I have enough in money market accounts to cover about 4 years of expenses. And those MMAs are only about 8% of my total investible assets. I probably have "won the game" to the point that I could put everything else into something safer and more conservative, and it would most likely outlive me. But, for the time being, I figure I'll just let it ride. However, as I get older, I may feel differently.

 

[RetiredHappy]

I was curious, so I googled it. Seems a popular definition of "HNW" individual is someone who has between $1M-5M in investible assets. I found one page that defined the bracket of $100K-$1M as "Sub-HNW"

$1M-$5M in investable assets is definitely not HNW. It falls into the "comfortable" category.

 

[skyking1]

Hard to believe that any HNWI's would be hanging here. (If HNWI is 100m as mentioned by the OP) I always thought HNWI started around ~30m so that seems possible for a few here. I know if I had 30m+ I'd be spending my time somewhere else.

Why? I think we all shower here regularly...... Checks breath

 

[HenryD]

$1M-$5M in investable assets is definitely not HNW. It falls into the "comfortable" category.

Not "comfortable" at 1.5M investible. More like "experiences existential dread weekly rather than daily".

 

[dmpi]

I'm 70/30. We're retired in our mid 60s. No kids to pass the money down to and we're pretty sure we have more than we'll ever spend. I just don't see any reason to become more aggressive nor less aggressive.

 

[Sojourner]

$1M-$5M in investable assets is definitely not HNW. It falls into the "comfortable" category.

According to two different AI engines I queried, you are incorrect. Here is the synopsis from Gemini AI and Claude AI:

A high-net-worth individual (HNWI) is someone with a significant amount of liquid assets, typically defined as at least $1 million.

There is no precise definition of how high one's net worth must be to fit into the HNWI category. However, these are some of the common thresholds used:

• Having liquid assets of $1 million or more, excluding personal assets and property such as one's primary residence.
• Having a net worth of at least $1 million, including all their assets (cash, investments, real estate, etc.) minus any liabilities.
• Having investable assets greater than $1 million. This includes cash, securities, private equity and institutional investments, but excludes personal assets like a primary residence.

 

[brett]

After doing it ourselves for approximately 30-years we hired professional asset management. We felt that our net worth had grown to a point where we needed professional guidance and management. Yes, we pay fees but the income deribed from our portfolio far outweighs the fees.

As of today our AA is:

- Domestic Bonds and bond funds: 42%
- Large CAP mutual fumds and ETFs: 29%
- Small CAP mutual funds amd ETFs: 14%
- International: 2.11%
- Other: 3.8%
- Cash: 10%

Our portfolio is professionally managed with these principles:

- Simplify & Consolidate: We had a number of taxable and retirement accounts spread all over creation.

- Preservation of assets: Our risk tolerance is *significantly* lower than during our acquisition phase. We want to keep what we've amassed.

- KISS: No complicated investments...PUTs, CALLs, hedge funds, etc.

Our portfolio consists of muni bonds (AAA rated), domestic bonds/bond funds, treasuries, equity mutual funds and ETFs, No individual stocks and no direct investments in countries which are hostile towards the US.

We did exactly the same. It took time to find the right person, the right firm. Just prior to early retirement.

One key attribute was that my spouse had to be comfortable with the person, the firm. She had never been interested. I wanted to ensure that should I get hit by a bus the finances would be in order. Only one call would be necessary and no searching about for paper or email trails.

It has been 13 years. Regular meetings, review, etc. All good. Our allocations have been changing to less risk over the past few years and will remain on that trajectory.

I got to the point where I simply did not want do this any more, I found it was becoming stressful. I had other plans for early retirement that did not include checking the numbers every day or every week. Now it is once a quarter.

 

[Rianne]

In Italy we'd be in the top 1%. That is shocking. Our NW is +$3m. But not $4m. I just figured out our 100% spending safety zone without SS. I think we're good.

 

[CRLLS]

We are in out early 70's. Call us LBYM'ers, our SS covers all of our expenses including our desires. We are not HNW by the OP's definition, far from it. Our investable bucket is a bit over 20x our expenses and we are 94/6. Our plan is that any unused monies will be our LTC insurance. We should be able to weather any foreseeable downturns in the economy/market. If we don't use it, it will go to our heirs. In that case, our planning outlook is longer than 30 year. We see no need to coast and sideline our investments IMO.

 

[Rickt]

Our WR is 1.5%. The preferred AA is 80/20, we are comfortable with it.

 

[medved]

Our WR is 1.5%. The preferred AA is 80/20, we are comfortable with it.

For those who have much more than they will ever need -- which is probably the case for someone with a 1.5% withdrawal rate -- and is also the case for us -- it seems to me there are two opposing (but both rational) philosophies. The first is "why take more risk than you need to take" and the other is "you are so well-covered that you can afford to take a good amount of risk." Rickt appears to take the latter approach, with an 80/20 allocation. We take something closer to the former approach, with a 50/50 allocation. There is no "right answer."

 

[yhoomajor]

I know if I had 30m+ I'd be spending my time somewhere else.

Whats wrong with folks here

 

[FREE866]

I don't think I qualify for HNW status, but I also don't know what the HNW cutoff is (and don't really care).

I'm 99/1 and am perfectly comfortable with the AA at age 55 retired 8 years now. It helps greatly that my net WR% is about 1%.

I consider tax consequences and try to minimize them, but keeping my AA where I want it is more important. Like another poster, I rebalance inside my traditional IRA so no tax consequences to rebalancing for me.

As far as employer stock, I did keep track of that while working and set myself an upper limit on those things. My personal limit was 4% of net worth, which was on the conservative side as a limit but I don't remember ever hitting it so it never really came into play for me. I think that's because by the time I started getting significant equity compensation I was at the later end of my career, and my net worth from aggressive saving along the way had already taken off.

Sort of similar to you , but less of a cushion. I'm at like 98% equities, will be 58 in a couple months and retired at 50. WR is ~3%. Fixed income has never appealed to me, isn't as tax efficient as equities and yes , over time , that does add up. I would only own FI to mitigate volatility , but I'm fine with volatility, Yeah, it stinks mentally to see portfolio erode in bear markets, but stocks always come back and I believe the future will mirror the past. So, yes my AA is acceptable to me.

I don't know if I'm "high net worth", but am damn grateful I don't have to work.

 

[WhenIsItTime]

After doing it ourselves for approximately 30-years we hired professional asset management. We felt that our net worth had grown to a point where we needed professional guidance and management. Yes, we pay fees but the income deribed from our portfolio far outweighs the fees.

As of today our AA is:

- Domestic Bonds and bond funds: 42%
- Large CAP mutual fumds and ETFs: 29%
- Small CAP mutual funds amd ETFs: 14%
- International: 2.11%
- Other: 3.8%
- Cash: 10%

Our portfolio is professionally managed with these principles:

- Simplify & Consolidate: We had a number of taxable and retirement accounts spread all over creation.

- Preservation of assets: Our risk tolerance is *significantly* lower than during our acquisition phase. We want to keep what we've amassed.

- KISS: No complicated investments...PUTs, CALLs, hedge funds, etc.

Our portfolio consists of muni bonds (AAA rated), domestic bonds/bond funds, treasuries, equity mutual funds and ETFs, No individual stocks and no direct investments in countries which are hostile towards the US.

I'm an FA skeptic. Do you mind sharing more about what you specifically get from "professional management"? Did you let them tell you what AA you should have? Your last couple points seem to imply the investments could be managed without assistance.

I'm surprised using funds and ETF's the FA can recover their fees.

 

[Lorenzo]

. . .

I'm surprised using funds and ETF's the FA can recover their fees.

I had a similar KISS portolio--with my FA's blessing--and he was perfectly happy to take his 1% of AUM fee for having a portfolio he could "manage" fairly passively.

 

[kgtest]

Hard to believe that any HNWI's would be hanging here. (If HNWI is 100m as mentioned by the OP) I always thought HNWI started around ~30m so that seems possible for a few here. I know if I had 30m+ I'd be spending my time somewhere else.

I thought the same thing! But who knows. Maybe some UHNW feel like giving back a little and feel this is a safe place to lurk and inform. But likely most are middle class.

You make a good point though, I wonder what portion of UHNW individuals withdraw from things like message boards, social media etc. I mean some of these folks we know are on X/twitter...

I don't have a private jet yet (if ever), but I bet if I do I will be posting a lot more in THAT forum... One thing I always felt was a little lacking on here was some creative business owners explaining some of the tax strategies they have used.... ehem 179 Bonus Depreciation etc. I will likely be spending more time understanding all that if I ever climb to 30MM...but if I get to 30MM when I do, it won't be worth what it was today...so alas, no more UHNW hehehe did I see a squirrel?

 

[ut2sua]

In Italy we'd be in the top 1%. That is shocking. Our NW is +$3m. But not $4m. I just figured out our 100% spending safety zone without SS. I think we're good.

If I recall correctly, the top 1% in the US population is less than $3M. The top 1% within the retired age (something like 55+) is much higher exceeding 8 figures (so 10M is not there yet). Folks in this forum are generally rich, but we all generally feel "poor" because we know how little 1M can generate per year for spending

 

[Fielding]

You make a good point though, I wonder what portion of UHNW individuals withdraw from things like message boards, social media etc. I mean some of these folks we know are on X/twitter...

You can find a lot of genuinely High Net Worth people posting on Reddit's r/FatFire. I find the informed discussions of, say, how to sell a 10-50 million dollar business to be very credible. (I can't say accurate having never done such a thing.)

But there are a least a few pretenders and troll posters too, which can get tedious. I love that this forum appears to have none of that. Folks here may be circumspect about divulging their exact portfolio amounts, but I never feel like anyone is making things up.

 

[RetMD21]

I don't think I qualify for HNW status, but I also don't know what the HNW cutoff is (and don't really care).

I'm 99/1 and am perfectly comfortable with the AA at age 55 retired 8 years now. It helps greatly that my net WR% is about 1%.

.......

It's hard for me to see what's wrong with this. We are retired at 86:14. I think the conventional recommendations apply to folks with higher withdrawals.

 

[braumeister]

I asked Perplexity and it said:
A high-net-worth individual (HNWI) is typically defined as someone who has liquid assets of between $1 million and $5 million. Interestingly, the SEC defines a HNWI for reporting purposes as having at least $750K in investible assets or a net worth of $1.5 million.
A very-high-net-worth individual (VHNWI) has liquid assets of at least $5 million.
An ultra-high-net-worth individual (UHNWI) has liquid assets of at least $30 million (some definitions start at $50 million).

Liquid assets are defined as cash, stocks, bonds, etc. that can easily be converted to cash (not the same as net worth).

 

[Dtail]

I asked Perplexity and it said:
A high-net-worth individual (HNWI) is typically defined as someone who has liquid assets of between $1 million and $5 million. Interestingly, the SEC defines a HNWI for reporting purposes as having at least $750K in investible assets or a net worth of $1.5 million.
A very-high-net-worth individual (VHNWI) has liquid assets of at least $5 million.
An ultra-high-net-worth individual (UHNWI) has liquid assets of at least $30 million (some definitions start at $50 million).

Liquid assets are defined as cash, stocks, bonds, etc. that can easily be converted to cash (not the same as net worth).

These are the definitions I had heard about too.

 

[brett]

We campare the fee to the results. And we measure it in after tax dollars....when the marginal tax rate varies from 30.5 to 42 percent.

 

[pjigar]

I have a very close friend who has that kind of net worth. Most of his money is parked in land and private businesses. Very few equity holdings. Although now he is starting to worry about liquidity of assets and trying to increase allocations to liquid assets. To each of their own.

 

[cyber888]

All I know is that I don't want to die with $5 Million - $10 Million.
We have no kids

 

[Route246]

For those who have much more than they will ever need -- which is probably the case for someone with a 1.5% withdrawal rate -- and is also the case for us -- it seems to me there are two opposing (but both rational) philosophies. The first is "why take more risk than you need to take" and the other is "you are so well-covered that you can afford to take a good amount of risk." Rickt appears to take the latter approach, with an 80/20 allocation. We take something closer to the former approach, with a 50/50 allocation. There is no "right answer."

We are at about 1% currently and about somewhere around 95:5. The question I ask myself is, "Am I comfortable with a higher risk of being less comfortable?" The answer for us is yes. For others it may be no. We got to where we are through having a plan (low expense ratio index funds, decades-long outlook and subsequent patience required, living below our means and a focus on becoming FI before we retired). We overshot FI by quite a bit so we are comfortable with the risk of becoming less comfortable. When my wife muses about how we oversaved and could have enjoyed it more and I have to remind her that her friends and family members are going into retirement under a certain amount of financial stress while she is not and she should never forget how fortunate she is to be in that position (we have stealth wealth so nobody knows what we have). I try to discourage her from seeing grass on the other side of the fence being greener.

I think we have a pretty good idea about our BTD and spending habits. We also know of cases where friends and acquaintances have blown through multi-million dollar inheritances in an alarmingly short amount of time. People in these forums probably believe that blowing through millions is very difficult and because they are here and because of that it probably is difficult for them to believe. All it takes is a penchant for remodeling and redecorating frequently to make that a reality but there are other bad habits that can also burn cash like a blast furnace.