If you answered “All of the above,” you appreciate investors’ near-term problems. Investment is complicated and loud nowadays. Investing for maximum profits is difficult.
Information overload will continue to be a problem. According to Mike Musselman, director of regional portfolio management at Fifth Third Private Bank, a part of Fifth Third Bank, information is readily available and spreads quickly, making it harder to evaluate investment possibilities. “The variety is overwhelming.”
Best method? “Quiet the near-term noise,” Musselman urged. “Invest in long-term winning strategies and behaviors.”
Fifth Third Private Bank has four Chicago-area offices, including a March Northbrook opening. Musselman manages nine Chicago-area portfolio managers.
They advise high-net-worth and ultra-high-net-worth clients with over $5 billion in assets. Musselman’s portfolio managers work with each Fifth Third Private Bank customer.
Control what you can.
Wealthy investors are occupied with complicated finances. Musselman urges them to ignore uncontrollable factors like inflation and market volatility. Instead, prioritize investment expenses and after-tax profits. “It’s not what you make, it’s what you keep,” Musselman added.
Example: index investing. It’s a common approach for cheaply accessing efficient markets like the S&P 500. Direct indexing is stronger. Many index underlying stocks are bought to duplicate its performance. Direct indexing allows selling failing stocks to produce losses that can be carried forward to decrease taxes. “It really creates a silver lining for our clients,” Musselman added. “We add value in volatile markets.”
Another bonus
The bank’s portfolio managers engage with subject matter specialists in a novel way. Wealth managers, private bankers, insurance experts, and senior trust advisers comprise this team. “We have a very collaborative approach,” said Fifth Third Private Bank senior portfolio manager Claire Ellerhorst. “We surround our clients with good people who are experts in their field.”
Multidisciplinary teams help entrepreneurs. Ellerhorst says they may find long-term growth and tax efficiency while preparing for retirement, legacy, and business transition.
Unbiased guidance adds value. The bank’s open investing platform offers products from several sources. “We sit on the same side of the table as the client,” Musselman added.
Cash returned.
Investors have alternatives to equities now that low-interest rates are history. Cash is back. Musselman advocates a somewhat larger than average cash allocation of 5-6%, based on the investor’s goals. “Each client is different,” he remarked.
Fifth Third Private Bank clients can access a money market product that yields over 4.7%. Cash is accessible for future investment possibilities. “Be patient,” Ellerhorst urged.
What’s next?
While the economy has slowed and a slight recession is probable, cautious optimism is warranted. Musselman anticipates second-half volatility to increase equities investing possibilities.
Musselman quotes Nobel Prize-winning economist Harry Markowitz, who claimed diversity is the only free lunch in investment, on the long run. Musselman adds another free lunch—his team’s optimism—to calm the clamor. “That allows us to guide our clients through the inevitable challenging periods,” he added. “Meaningful growth occurs over time.”
