Balancing Concentration Risk
Accumulating Wealth
Primary goal: Fitting a concentrated position into a broader plan
The Background
Daryl, a Ph.D. in biomedical engineering, enjoys picking biotech stocks, a sector he understands well as head of Research & Development. Professional success has generated substantial financial assets, including a 401(k) plan, Roth IRA, and taxable accounts. Daryl was not confident in investing outside of the biotech industry and not familiar with tax-minimizing investment strategies. He reached out to HTG for advice on designing a comprehensive, tax-sensitive investment strategy.
The Challenges
- How to build a diversified portfolio and choose appropriate investments within his 401(k) to balance the concentrated risk of biotech stocks.
- How to manage his significant assets in a tax-smart manner.
- Finding the time to create and implement a long-range investment plan given his busy schedule.
How We Helped
Understanding Daryl’s desire to continue to manage his concentrated portfolio of biotech stocks, his HTG advisors designed a globally diversified portfolio to balance this risk and provided guidance on the investment choices in his 401(k). Attention was given to asset location-- buying tax-efficient investments in brokerage account and placing less tax-efficient investments in retirement accounts. An Investment Policy Statement documented the relationship between the HTG-managed portfolio, his stock positions, and the 401(k). While Daryl enjoyed the comfort of knowing that most of his financial assets were professionally managed, he equally appreciated the quarterly performance reviews and market updates – some by video to accommodate his work schedule.
- Using HTG tools, gained a consolidated view of all Daryl’s assets and overall asset allocation
- Helped Daryl collect information needed to formulate a long-range plan in the context of his broader assets
- Identified opportunities to minimize taxes
- Guided Daryl in selecting investments in his employer 401(k)
- Served as a sounding board to discuss economic and market data
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