What Happens When You Only Play Offense in Your Wealth Management Plan

One of the biggest mistakes people make with their wealth building is to focus too much on growth. This is like a basketball team that only focuses on offense, and never plays defense. They may win some games, but they won’t ever have enough firepower to win the championship.

We all want to make more money. But, a crucial part of wealth-building is protecting the assets you have already accumulated. You need to play some defense in your wealth building strategy if you want to achieve your financial goals.

Warren Buffet’s Rules for Investing

Billionaire Berkshire Hathaway CEO Warren Buffet is one of the most successful investors in the history of capitalism. He has two investment rules:

  • Rule number one is never lose money.
  • Rule Number two is never forget rule number one.

If you are only ever focusing on growth, you put yourself at risk to violate these rules. You need systems in place to protect your gains, because not every investment decision you make will pan out.

Protecting Your Wealth

Protecting your wealth doesn’t mean putting stacks of cash in a secret vault or stuffing all of your mattresses with loose cash. You need to invest in some assets that provide a hedge against fluctuations in other markets. Your mom probably explained this principle to you as not putting all your eggs in one basket.

Risk cannot be avoided in its entirety, but there are lots of ways to protect your wealth and hedge against market downturns. Some common asset classes that are used to protect wealth include:

  1. Option Strategies
  2. Insurance
  3. Annuities (income only)
  4. Bonds

The right balance of assets in your investment program will depend on your current financial situation, your goals, and the state of the economy. Your financial adviser can help you choose the best allocation for your needs.

Responsible Risk-Taking

Protecting your wealth doesn’t mean you can’t take risks. A great financial adviser will help you find responsible risks to grow your assets. The right risks for every investor are different. There is no one-size-fits-all approach to wealth management and OmniStar is the first to say we are not the right fit for every investor.

What is the difference between responsible risk-taking and risk-taking? It doesn’t take any special skills or knowledge to take risks with your money. Anyone can put coins in a slot machine or invest in all of the stocks being discussed on cable business shows.

Responsible risks, on the other hand, are anchored in Warren Buffet’s two rules for investing. They are thoroughly researched. They aren’t hunches. Responsible risks are also backed by a solid wealth protection strategy so that if one investment underperforms, your entire portfolio isn’t at risk.

When creating your wealth management goals and strategy, make sure you are playing both defense and offense. Your goal isn’t to win a single game—it’s to win the championship.  Are you looking for wealth management help? See how OmniStar Financial works with clients like you build a comprehensive wealth management strategy.


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