Market volatility: This is how wealthy investors are coping

By MarketsFOXBusiness

Cboe CEO on managing risks in a volatile market

Cboe Chairman and CEO Ed Tilly on the challenges for investors managing the market volatility risks.

The U.S. equity market has been characterized by wild swings throughout the past few months, and as economic and policy certainties persist, some experts say volatility is here to stay.

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During the extended bull market that followed the financial crisis, many investors grew accustomed to major indices continually achieving new record highs.

However, half of the Dow Jones Industrial Average’s biggest single-day declines and gains occurred this year, according to Forbes.

In order to prepare for increased uncertainty, some investors are taking steps to decrease their exposure to potential risk.

Here are some ways wealthy investors are adjusting their portfolios, as compiled by the Millennium Trust Company:

Reducing exposure:

As all three major stock indexes become more volatile, high net worth individuals are allocating less money toward individual stocks. In fact, over the past year, less than half of wealthy respondents invested in individual stocks – a 10 percent decline from the year prior.

They also invested 16 percent less in individual foreign stocks when compared with 2017.

Additionally, wealthy investors are pulling money from mutual funds and bonds – a recent flattening of the yield curve, with one spread even inverting, has sounded alarm bells throughout the financial community. Typically, a flattening or inverted yield curve is a signal of economic weakness or a looming recession.

Investing here instead:

Ninety-percent of wealthy investors are turning instead toward nontraditional assets.

About one-in-three respondents told the Millennium Trust Company that they were investing in real estate – specifically single-family rental properties.

Twenty-percent said private equity is still a major focus, while more than 14 percent were allocating cash toward hedge funds.