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The Stewardship of Wealth: Successful Private Wealth Management for Investors and Their Advisors, + Website by Gregory Curtis

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Implementation Issues

If the future were a repeat of the past, librarians would be rich.

—Warren Buffett

When a family experiences a major liquidity event, or when an invested portfolio is being substantially restructured, many questions arise about how to proceed. These questions have mainly to do with market timing considerations and risk tolerance issues, but other issues are involved as well, including good old-fashioned human emotions.

To examine these issues, let's imagine a family—we'll call them the Goldsmiths—who have just sold their family business for $100 million. The business was built up over four generations, and the current leaders of the family, Mark and Ellen Goldsmith, are acutely aware of their stewardship obligations. They recognize that sitting on $100 million of cash, though certainly reassuring in the short run, is simply a way for the family to become a little poorer every year. Yet they fear that if they quickly deploy assets into the capital markets, their hard-earned assets could disappear in an unexpected bear market. Because the family's liquidity event occurred in September of 2008, in the idle of a deep bear market, those fears are hardly unfounded. How should the Goldsmiths proceed?

Macro Considerations

We know, from history, that capital markets tend to rise roughly twice as often as they decline. This consideration suggests that the Goldsmiths should invest as quickly as possible, because the long-term odds of the markets going up are in their ...

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