Navigating today’s public markets requires more than just picking the next winning stock. Emerging technologies, data-driven strategies, and a slew of new investment vehicles have created a complex landscape in which there is more potential for growing wealth than ever before. To capitalize on this opportunity, ultra-high-net-worth investors must take an elevated approach that goes beyond predictions.
Public Markets vs. Private Markets: Why You Need Both
There are several reasons why public markets play a crucial role in any ultra-high-net-worth portfolio. First, publicly traded investment vehicles offer high liquidity because they can be bought and sold quickly. This provides investors with better access to their capital.
Investing in public markets, which offer varied asset classes across myriad sectors, also opens the door to greater portfolio diversification, helping to mitigate risk.
Public markets are highly regulated, which helps protect investors and ensure business practices are above board. And since public companies must disclose financials regularly, investors experience a level of transparency that can influence investing decisions while providing peace of mind.
Additionally, the minimum investment required to take advantage of public markets is often far less than what’s needed to plunge into private markets. Public markets also provide long-term returns that often outpace inflation. In fact, as reported by MarketWatch, the U.S. stock market has beaten inflation by 6.1% on an annualized basis since 1793, according to research by Santa Clara University Professor Emeritus Edward McQuarrie.
The Approach: Rely on Process, Not Predictions
With thousands of publicly traded companies and various asset classes including but not limited to stocks, bonds, and Exchange Traded Funds (ETFs), investors have many choices when deciding where to invest. There are more than 40,000 publicly traded companies on the equities side and more than 3 million securities on the fixed-income side. The number of options can easily become overwhelming.
Instead of investing in the assets-du-jour or making decisions based on instinct, Caprock uses a tech-enabled approach to establish separately managed accounts (SMAs). Technology focusing on data optimization, dynamic asset allocation, continuous tax loss harvesting, and long/short extensions prioritizes scalability and individualization. This method allows us to effectively create highly customized portfolios that provide long-term growth and take advantage of short-term market volatility. We stay ahead of paradigm shifts in the industry through extensive research and continuous monitoring. Again, it’s all about having a strategic, pre-planned process.
For example, numerous market predictions for 2020 never came to fruition once the pandemic, which no one saw coming, took hold. At Caprock, our reliable process and tech-forward approach allowed us to dynamically rebalance portfolios and conduct tax-loss harvesting to take advantage of market volatility and preserve clients’ wealth.
The lesson here is that it’s important to eschew reliance on predictions when investing in public markets and work with an advisor who not only has plenty of experience but also a process-driven approach.
Educate to Elevate
Before making any decisions, it’s important to educate yourself. Often, the best way to do this is to consult a financial advisor with deep public markets expertise and a solid foundation in using financial technology. They can help you understand the markets, the opportunities, and the risks. At Caprock, we have a diverse, experienced team who have more than $7 billion invested in public markets on behalf of our clients.
Request a personalized preview of our quantitative tech-enabled approach.
The Caprock Group, LLC (“Caprock”) is an SEC Registered Investment Advisor. This communication is not an offer or solicitation with respect to the purchase or sale of any security and is for informational purposes only. Information contained herein has been derived from sources believed to be reliable, but Caprock makes no representations as to its accuracy or completeness. Investment in securities involves the risk of loss. Past performance is no guarantee of future returns. Registration with the SEC does not imply a certain level of skill or training.
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