The Endowment Model Part 1: The Basics

10 Mar The Endowment Model Part 1: The Basics

Part 1: Intro to Endowment 

  

We have all seen the late-night infomercials promising a million-dollar secret at the low price of $19.99. Everyone has some secret to how they made millions in the market. The reality is, that there is no secret. Everybody wants 3 things from their investments: growth, liquidity, and security. The flat-out truth is you can’t get all three in any one investment vehicle. So why not two? Or three or four or however many you need to accomplish your investment goals. At Ortiz World Wealth, we are not concerned with keeping secrets as much as we are keeping money in our client’s pockets. Not only in the stock market, but in their entire financial life. This article is the first of many in a series that will help you understand exactly how Ortiz World Wealth customizes our clients portfolios and helps them to Plan Smarter & Live Better. 

  

At Ortiz World Wealth, we look at your entire financial picture, not just how much money you have to throw at Wall Street. We help families ensure that their entire estate is set to perform the way that they want. All your assets should be accounted for and utilized to the best of their ability, to ensure that you are meeting your financial goals and living the life that you deserve. With all the different ways you worked to earn your money, your money should be able to work just as hard in just as many ways for you. At Ortiz World Wealth we use every tool at our disposal to position you tactically to make sure you achieve your goals. The common term for our method, is the Endowment Model.  

  

The Endowment model got its name by the institutions which first put this strategy on the map. Harvard and Yale have been using a similar method in how they invest their school’s endowment funds for quite a few decades, quite successfully might I add. In fact, the top 20 university endowment funds grew by more than 9% annually, on a real basis, between the years of 1992 and 2005. Investopedia’s Manoj Singh helps make this model of investing easy to understand. Simply put, the endowment model focuses on two main goals; Generate high enough real returns to cover their yearly withdrawals without dipping into their principle; Aim to preserve the real value of their principle, this means fighting inflation. They achieve these goals by widely diversifying their funds among different markets. Although many different means are utilized, they focus the majority of their funds on Alternative investments. Basically, they put their money in appropriate amounts, in the appropriate places to accomplish yearly growth without touching or losing their principal value. So, this begs the question, “What are Alternative Investments, and why aren’t I in them?”  

  

Alternative Investments actually cover a very large range of investments in the market, most of which we are familiar with, such as precious metals and real estate. However, they are not so easy to access. Many Alternative Investments require some expert research to understand as well as having a very high minimum investment to participate. Not only this but they require special licensing and education to gain that access. Brokers are limited to securities, and certain agents are limited to their company’s insurance products, but Registered Investment Advisors such as Ortiz World Wealth are licensed and educated to utilize every investment class for their clients best possible interest.  

  

We provide our clients with access and understanding when it comes to these alternative investments and the endowment model of investment planning. This means we build our clients’ portfolios to fit their lives, limitations, and goals by utilizing all three investment classifications; Guaranteed, Non-Guaranteed, & Alternative. Once we have found out what investment vehicles are needed to fit our client, we then have to plan them out for the years to come, and that’s where segmentation comes in. Between Endowment and Segmentation, we are able to customize every client’s portfolio to their exact goals and needs. All of this and more to come in our next Ortiz World Wealth Educational blog series. Plan Smarter Live Better 

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