5 Questions about Wealth Management - The Business Review (Albany):

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came after a period of lower-than-normal volatility the previoudsseveral years. In fact, the volatilityy levels in the fourth quarter of 2008 were beyond what most investors have experienced intheirt lifetime. This combination of high volatility and fallingv asset prices in a very condensed time frame has many investorsd questioning their risk toleranceand long-term investment Do you advise clients to invest in alternative assets?? Why or why not? “We do recommend an allocation to alternative investmentsz for most of our high-net-worth clients who have ample liquidity across the rest of theit investment portfolios.
Given the illiquid nature of mostalternativ investments, the size of an alternative investmentg allocation will depend on the risk profilse of the client and their overall comforft level with having investments that do not have daily or even monthl y liquidity.” Generally speaking, what are the benefitw and shortfalls of alternative compared with the equity markets? “Our definition of alternativde investments includes most of the nontraditionap asset classes beyond stocks and bonds, including hedgwe funds, commodities, private equity and real estate.
Including thes types of investments in a portfolio eitherthrough (exchange-traded funds), mutual funds or direcr investments — increases the overall diversification and enhances the risk/returbn profile of an overall portfolio. The primary downside to these typees of investmentsis illiquidity, which is why clients need to thinlk beyond the return expectationsx when committing capital to alternativde investments.” Would you advise clients to remove funda from their IRAs and invest in alternative assets ?
“Given the fact many alternative investmenta are not very tax-efficient and are somewhatr illiquid, we have found that owning them in tax-deferrer accounts with longtime horizonws like IRAs can be an ideaol situation. This would relate more to clientx that havelarge tax-deferred accounts, like rollover IRAs from previoues 401(k) plans. By owning alternative investmentxs ina tax-deferred account, you are able to eliminatr the tax inefficiency issue.” What are the safesgt investment bets right now?
“While the equituy markets have had a significant rally off the Marcg 9 lows, we think the safest long-term bets are high-quality investments acrosa both the equity and fixed-income markets. In the equity the rally has been led by those sectorss that were beaten down the most last yearand low-quality stocks in general. We thinmk that high-quality, large-cap, globalp franchise businesses continue to be cheapo on arelative basis. In fixe d income, we expect to see the continued normalization in the credit marketsd andprefer high-quality corporatde and municipal bonds.
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