Leverage market highs to diversify and preserve your wealth
June 06, 2024
With markets near their all-time highs, now might be the right time to optimize your portfolio for future risk-adjusted returns by diversifying a concentrated equity position.
Many clients are already taking advantage of the elevated equity market to mitigate single stock risk. In an episode of The Markets podcast, Kerry Blum, global head of the Equity Structuring Group within Private Wealth Management, highlighted the total sales of restricted stock are at their second highest annualized level in a decade.
“While concentrated equity can be a great way to create wealth on a risk adjusted basis, it's generally not the best way to maintain wealth,” Blum noted.
For those choosing to liquidate positions via block trades, Blum’s team has seen the average trade size increase by about 15% relative to 2022 and 2023. The high-demand environment has also meaningfully tightened the average discount to market price.
The path to wealth diversification looks different for each individual and timing the markets is difficult. A strategic plan can help direct action when windows of opportunity arise from higher equity markets or the capital markets cycle.
In the absence of a plan, investors can experience “holder’s remorse.” In 2022 after equity markets sold off from pandemic highs and capital market activity dried up, Blum noted investors who were “considering plans but had not yet implemented… [experienced] regret for not taking action when they could have.” Blum added, “I think it's just a good reminder to be prepared. Spend the time in advance to think about what you want to do. And when those windows are there, move forward.”
To help mitigate the risks of a concentrated equity position, our advisors and specialist teams work with clients to understand, identify, and develop short and long-term goals for their wealth, before incorporating contractual securities laws and practical considerations, including the unique complexities of 10b5-1 plans for corporate insiders.
For more information on this or other wealth-planning topics, please reach out to your Goldman Sachs team or request an introduction.
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