Ultra-wealthy bear-market preparation is underway. As Darren Winters says “it probably will come as no surprise to a number of market watchers that billionaires are preparing for the next bear market”.
In a nutshell, the ultra-wealthy bear-market preparation is all about (yes you guessed it) protecting wealth.
The world’s most elite investors are burning the midnight candle as they ponder over strategies intended to protect their wealth, including their client’s wealth, from a prolonged stock downturn which could see stock prices declines by more than 20% (at best).
So the ultra-wealthy bear market preparation entails a number of investment strategies and tactics to preserve wealth
Darren Winters looks at the strategies used by billionaire investors ranging from hedge fund king Ray Dalio to John Tudor Jones
Diversification in uncorrelated assets is the crux of the ultra-wealthy bear-market preparation
These investors protect themselves by building investment portfolios with uncorrelated assets.
Put simply, uncorrelated assets are investments which tend not to move up or down in the same direction as the other asset classes in the portfolio. A small allocation to these uncorrelated items can help to protect the value of a portfolio in wild market gyrations which typically occurs at the end of a market cycle.
Precious metals, particularly gold features in the ultra-wealthy bear market preparation
Why? Gold is considered the king of uncorrelated assets. The price of gold tends not to move in the direction of the stock market. In fact, the price of gold and stock prices are negatively correlated. In other words, in a bear market when stock price fall gold price goes up.
So why else is the shiny yellow metal part of the ultra-wealthy bear market preparation?
Gold has a track record of offering a store of value like no other asset class and it can also reduce the volatility of a portfolio.
Gold is a risk off asset, a safe haven asset which investors pile into during tumultuous times.
Jumping on the ultra-wealthy bear market preparation bandwagon entails adding gold to your portfolio
A string of Billionaire investors such as Ray Dalio, David Einhorn, John Paulson, and John Tudor Jones II have all added gold to their portfolios.
Moreover, Sam Zell, the pioneer behind real estate investment trusts (REITs) also advocated buying gold in January.
Sam Zell’s investment plays in January also revealed the billionaire investor’s interest in gold.
“For the first time in my life, I bought gold because it is a good hedge,” said Sam Zell, the founder of Equity Group Investments in a Bloomberg TV interview.