As the vibrant spirit of spring blooms around us, we’re thrilled to reconnect with you in this quarter’s newsletter!

Investment Update: Enhancing Your Diversification

Just because the S&P 500 is close to all-time highs does not mean everything else is.

We remain concerned about inflation, interest rates, and market valuations.

To be cautious does not mean we are passive.  We have made some additions to your investments in liquid alternatives as well as commodities (what we call “diversified sleeve”).  These investments potentially offer opportunity for principal growth and diversification outside of traditional stocks (“growth sleeve”) and bonds (“income sleeve”).

Depending on your account’s risk/return profile, you might have exposure to some or all of these liquid alternative investments (daily pricing, and in all but one case, daily liquidity):

1. Equity long/short fund that takes limited exposure to direction of stock markets. This fund seeks to make returns on buying cheap companies with strong market positions and cash flows and hedging by selling shares in overvalued companies with deteriorating balance sheets.  Returns can be volatile, particularly in markets that lack trend or narrowly-focused rallies.  Longer term, the fund has had a positive long-term track record due to strong stock selection despite various headwinds (growth stocks outperforming value, momentum stocks continuing to be bid up beyond fundamentals).
2. Corporate event driven fund that consists of 2 strategies: (1) merger arbitrage, the majority of the fund, seeks to profit from the completion of announced corporate mergers and acquisitions, typically by going long the acquisition target selling at a discount to the announced price and shorting the stock of the acquiror, which nets to limited exposure on absolute direction of stock markets, and (2) special situations, the minority of the fund, seeks to profit on idiosyncratic opportunities. Examples might include buying/selling options around investor days, special dividends, and other situations.  Taxable clients have the potential to benefit from limited capital gains distributions as this fund was inherited from a previous manager’s strategy that generated meaningful tax loss carryforwards.  While this is a lower volatility strategy than other of your investments, principal can go down if certain deals break up or trades in the event driven strategy do not work out.
3. Late state venture capital fund that invests in private companies with sales of over $100mn and potentially further rapid growth. This space has lagged public markets since the peak of the venture capital bubble in 2021, yet the companies in the portfolio have continued to grow, in some cases turning profits, and secondary market liquidity has also increased, providing more transparency for valuations.  Future catalysts for appreciation might come from a rise in mergers and acquisitions (larger public companies or other funds buying the fund’s underlying companies), further financing rounds for future growth, and IPO’s into the public market.  Investors with longer time horizons (years) potentially benefit from the only public vehicle with a daily NAV.  Risks include economy and specific risks to any of the fund’s nearly 100 company investments.  The fund also has limited windows for redemption.  (Accordingly, it is a modest allocation to portfolios with more aggressive risk appetites.)
4. We have also begun a position in a managed futures fund that invests across multiple asset classes based on technical price factors. Times of macroeconomic and political uncertainty, including trending inflation and interest rates, potentially might offer bouts of volatility to traditional asset classes, but they might also provide opportunity for managed futures managers to shine.  Managed futures managers take positions long or short on equities, bonds, commodities, and interest rates depending upon their views of price and other technical trends in the markets.  Low volatility driven by low inflation and interest rates was a significant drag on performance for many funds in the last decade, but we believe the times might be shifting in favor of managed futures.  Our specific manager invests in an index meant to replicate the returns of some of the world’s leading managed futures managers.
5. Additionally, we have maintained meaningful exposure to commodities (precious metals, broad based commodities including energy, agriculture, metals). Recently, we have added small positions to cryptocurrency and gold miners.  These all potentially benefit from rising government debt, uncertainty in inflation and interest rates, and geopolitical risk as well as loss of confidence in the US Dollar globally.  Supply shortages in certain commodities offer a further potential catalyst.  The main risk would come if the US Dollar regained credibility at the expense of alternative currencies.

Beyond Price: Nourishing Your Wealth and Future

Let’s talk about family wealth management. It’s not just about numbers and transactions; it’s about values and relationships.

In the media, there’s a lot of talk about whether financial planning and family wealth management is all about the price. Some suggest that the cheapest option is the best because all you need is a basic portfolio and no personalized service. But that’s like saying all you need for dinner is fast food.

We see things differently. We understand that each family is unique, with its own goals, dreams, and challenges. That’s why we offer personalized advice and services tailored to your specific needs.

Our approach is about more than just investments. It’s about building a long-term relationship that extends beyond the numbers to include your family and your future. We’re here to help you stay on track and avoid costly emotional decisions that can derail your financial goals.

So, while others may offer quick-service solutions, we believe in serving up a gourmet meal—a comprehensive plan that nourishes your financial health and empowers you to live your best life. Because when it comes to your wealth and your family’s future, value matters more than price.

Maximize Your Financial Management with Our Online Portal

Are you taking full advantage of your online portal? It’s a powerful tool at your fingertips. Here’s what it offers:

• Consolidated Financial Overview: Link external assets and liabilities to easily track all your finances in one centralized platform.
• Personalized Planning Tools: Tailored features to assist in your financial planning journey.
• Comprehensive Reporting: Access various reports related to your AWM accounts effortlessly.
• Data Collection Tools: Streamline your financial planning process with tools designed to gather relevant information.
• Secure Vault: Safely store and access AWM reports, upload documents for sharing, and maintain a private documents folder.

If you need help setting up your credentials, logging in, or navigating your online portal, please contact Debbie.

Looking Ahead: Proactive Planning for Your Financial Future

As we bid farewell to another tax season, it’s a fitting moment to shift our focus forward. My most successful clients recognize the value of planning and have peace of mind in knowing that they are taking care of their financial health.

While tax season may be behind us, the opportunity for strategic planning lies ahead. Don’t wait until the year’s end to assess and make crucial decisions. Now is the time to be proactive and set the groundwork for a prosperous retirement.

Whether it’s mapping out investment strategies, optimizing tax efficiency, or safeguarding your legacy, our team is here to guide you every step of the way. Remember, true wealth isn’t measured by how much you earn, but rather by how effectively you preserve and grow what you have.

Sincerely,

Petr Burunov, CFP®
President / Wealth Strategist

The post Client Newsletter 2Q24 appeared first on AWM.

When it comes to things where quality and depth of service do not matter, one might focus exclusively on price.  For example, consider health care.  If all you need is a bandage for a minor cut, then you might simply want to buy the cheapest generic bandages at your local supermarket.  (Or if you are a millennial, order it online and let a drone drop a box of 500 at your front door.)

However, what if your loved one needs critical surgery on his or her heart or knee?  Would you simply shop for the cheapest operation, not really knowing whether the surgeon does a good job or not?  What if the outcome of that surgery could impact the quality of your loved one’s life for years to come, maybe even a lifetime?

That is when you want to focus on value, not merely price.  You do not just want to spend the least amount of money for a product anyone can provide at satisfactory quality.  You want to find the best Doctor (or service) that will give your loved ones the highest chance for a successful outcome that will last for years to come.

People often confuse price with value. These are two different issues.

Or suppose you want to take your loved one out to eat?  Let us say you want to take them for tasty meat and salad.  You have a choice of two restaurants: Restaurant A and Restaurant B.  Restaurant A offers you such a meal for under $10 each.  Restaurant B offers the same meal for $100.

The buyer looking solely at price would opt for the cheapest deal at Restaurant A.  No questions asked.

However, the buyer of Restaurant A could have made a very bad deal.

Restaurant A is a fast-food burger joint.  It fulfills the basic requirements that the buyer sought in the first place.  Meat (hamburger), salad (lettuce in a bun), vegetable (French fries), and a drink (your favorite soft drink) were included in the package.  The buyer gives up quality of food to gain time. Whether you consider going through a drive-thru or eating in an open, noisy venue stuffed with kids as a romantic get together is open for debate.

Now consider Restaurant B, a high-end steak restaurant.  Several choices of the finest cuts of prime rib, salad bar, sautéed vegetables, and a mix of drinks make for a tasty menu.  A private, intimate dining atmosphere perhaps with music and a dedicated waitperson create an inviting ambiance. In this setting, the buyer is paying for a relaxing environment and understands the value of this high-end meal.

The buyer looking to treat his or her companion will gravitate toward Restaurant B.  B offers value.  The price might be higher, but the quality and level of service makes it a better value for what the buyer wants to do: to please his or her loved one.

Family wealth management is a value proposition, not a price transaction. 

Lots of confusion exists in the press about whether financial planning and family wealth management is merely a pricing issue or a value proposition.  Many writers (and cookie-cutter robo-operations) would have you believe that managing family wealth is simply a “price” issue.  They claim that the lowest price wins because all the buyer needs is a cheap portfolio that looks like everyone else’s and needs no specialized service.

At Ambassador Wealth Management, we cater to customers and their families who seek custom advice. They deserve more than being thrown into a “one size fits all” bucket of investments and services.  Our clients benefit from aligning with our firm that thinks globally but acts locally. They are people and families whose lives matter to us.

We work best with clients who can benefit from a long-term relationship that includes and extends beyond investments to their families.  You benefit by us helping keep you on track and step aside from emotional decisions that cost many of your neighbors dearly.

In other words, the press and their robo-friends would have us all eat fast food simply because of price.

But if you want to eat steak in the context of a comprehensive health and nutrition program that might empower you to live with purpose, seek value.

Schedule appointment

The post Value Vs. Price: The Difference Between Celebrating Your Anniversary at McDonald’s Vs. Morton’s appeared first on AWM.