How Wealthy People Should Actually Invest
- Chagrin Valley
- Apr 21
- 5 min read
Investing is both the easiest and the hardest part of wealth management.
It’s where I encounter the widest range of biases, expectations, and probably the highest influx of “junk” information my clients see on a daily basis. Hand up—my industry is at least partly to blame for this. The current state of investing is, in many ways, a byproduct of an industry that has created complexity where it didn’t belong—often just to create the perception of added value (just look at the headline image above...it was the first option when I typed "investing").
Unfortunately, that’s also contributed to a broader skepticism:
“financial advisors are scams”
“why would you pay someone to do what you can do yourself?”
There’s probably a longer post in my future on that.
But for now, a more useful question:
How should wealthy people actually invest?
A conversation I find myself having more often than people might expect usually starts the same way.
Someone has done well. Not in a theoretical sense, but in a very real one. The business worked, or the career played out as planned, or the accumulation phase simply went right for long enough. However it happened, the result is the same—the balance sheet is substantial, the pressure to earn more has eased, and for the first time in a long time, there’s room to think a little more broadly.
And yet, when we actually look at how the portfolio is positioned, it still reflects a very different version of that person’s life.
The allocation is growth-oriented. The underlying assumption—whether explicitly stated or not—is that more is still the goal.
What’s interesting is that nothing about the portfolio is necessarily “wrong.”
In many cases, it’s exactly what you would expect from a well-constructed strategy. It’s diversified, disciplined, and built around principles that are widely accepted as best practice.
But that’s also part of the issue.
Because most best practices in investing are designed for people who are still in the process of accumulating wealth.
They assume:
A long time horizon
Ongoing income
A need for continued growth
And when those assumptions change—but the strategy doesn’t—you end up with something that still works, just not in the same way it used to.
One of the more subtle shifts that happens at this stage is that risk starts to mean something different.
During accumulation, risk is often framed as volatility. Markets move, portfolios fluctuate, and as long as the long-term trajectory is intact, those movements are largely tolerated.
But when the portfolio is no longer being supported by earned income—when it’s expected to support life instead of just grow alongside it—that same volatility starts to carry different implications.
A meaningful drawdown isn’t just a temporary setback. It has the potential to influence behavior, delay decisions, or force adjustments that wouldn’t otherwise be necessary.
This is where concepts like sequence risk move from being theoretical to practical. The order in which returns occur begins to matter in a way it didn’t before, particularly if the portfolio is being used to fund spending.
And yet, many portfolios are never really adjusted to account for that shift.
Another place this tends to show up is in how income is—or isn’t—designed.
In many portfolios, income is treated as something incidental. It’s whatever the underlying investments happen to produce, rather than something that’s been intentionally structured. Dividends, interest, distributions—they exist, but they’re not always aligned with how money is actually being used.
Which creates a disconnect.
On one hand, there’s a need for reliable cash flow to support lifestyle or create flexibility. On the other, there’s a portfolio that may be optimized for total return, but not particularly thoughtful about how that return is delivered.
Bridging that gap doesn’t necessarily require sacrificing performance. But it does require being more deliberate—about where income is generated, how it’s taxed, and how it interacts with the rest of the balance sheet.
Liquidity is another area that often gets less attention than it should.
Over time, portfolios tend to accumulate layers—private investments, alternative strategies, longer-duration assets. Many of these can be beneficial in isolation, particularly from a return standpoint. But they also introduce tradeoffs.
When a meaningful portion of wealth is tied up in structures that can’t be easily accessed, flexibility becomes constrained. Decisions that should be optional start to feel fixed, simply because the capital isn’t readily available.
That doesn’t mean illiquid investments are inappropriate. It just means they need to be considered in the context of how and when the portfolio is actually going to be used.
In practice, asking the question “how should wealthy people invest?” tends to lead to a different kind of conversation.
It might involve segmenting assets based on time horizon, so that near-term needs aren’t exposed to unnecessary risk. It often includes being more intentional about how cash flow is generated, rather than relying on whatever the portfolio happens to produce. And it usually brings a clearer focus to downside risk—not just in terms of what can be tolerated mathematically, but how it would actually be experienced.
It also starts to connect more directly with other parts of the plan. Investment decisions influence tax outcomes. Liquidity decisions affect estate strategy. The way income is generated can either create flexibility or limit it over time.
When those pieces are considered together, the portfolio becomes less of a standalone construct and more of a system.
This is typically where the work becomes more interesting.
Not because it’s more complex, but because it’s more intentional.
In many cases, the goal isn’t to rebuild the portfolio from scratch. It’s to adjust it so that it better reflects the reality of where things are today, rather than where they were ten or fifteen years ago.
And often, that leads to something that feels different—not necessarily more aggressive or more conservative—but more aligned.
For a long time, many people experience investing through a very narrow lens.
The relationship is defined by a single question:
“How did we do relative to the S&P 500 this year?”
Which means success—and failure—get tied to an outcome that is:
Nearly impossible to consistently achieve
And completely disconnected from what the portfolio is actually meant to support
It’s not surprising that this leads to confusion.
Or frustration.
Because the benchmark was never the real objective to begin with.
So what does this actually look like in practice?
For most people at this stage, investing becomes less about maximizing outcomes and more about aligning the portfolio with a few key realities:
The portfolio needs to support life—not just grow in isolation
Risk should be defined by what’s actually required, not what’s theoretically optimal
Liquidity needs to be intentional, so decisions aren’t forced at the wrong time
Income should be designed, not incidental
The portfolio should work in coordination with the rest of the plan (financial, tax, estate) and not as a standalone piece
None of this is particularly complex.
But it does require a shift—from thinking about investing as a performance exercise to thinking about it as part of a broader system.
