8 INVESTMENT STRATEGIES

Managing substantial wealth requires more than following conventional investment
advice. When your portfolio exceeds $5 million, you gain access to investment strategies
and opportunities that simply aren't available to typical retail investors, strategies that
can possibly enhance returns, reduce risk, and provide greater flexibility in achieving
your financial objectives.

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Yet many affluent families remain unaware of these options. Traditional financial
institutions often limit their clients to standard products and publicly-traded securities,
leaving substantial opportunities unexplored. Whether due to institutional constraints,
lack of expertise, or simply because these strategies don't generate sufficient
commissions, many advisors never present the full range of possibilities available to
high-net-worth investors.

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This guide introduces eight investment strategies that merit consideration when
building and managing substantial family wealth. We'll explore both traditional
approaches and alternative opportunities, examining the benefits, risks, and
considerations unique to each. Our goal isn't to recommend specific investments. That
requires understanding your individual circumstances, objectives, and risk tolerance.
Rather, we aim to expand your awareness of what's possible and help you ask better
questions of your current advisors.

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At Aventura Private Wealth, we believe an informed investor makes better decisions.
The financial services industry often relies on complexity and jargon to obscure rather
than illuminate. We take the opposite approach: clear communication about how
different investment strategies work and why some might be appropriate for your
situation while others aren't. That clarity starts with understanding your options.

Diversified Global Equity Portfolios

The foundation of most substantial portfolios remains a well-constructed equity allocation. However, 'well-constructed' means something quite different for high-net-worth families than it does for retail investors following generic asset allocation models.

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At the $5 million level and above, you can build truly diversified global equity portfolios that capture opportunities across developed and emerging markets, multiple sectors, and various market capitalizations. This isn't about buying a handful of index funds, though those have their place. It's about thoughtful exposure to global growth, managed with appropriate attention to risk factors, currency considerations, and tax efficiency.

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The key advantage of substantial wealth is access to strategies and managers that simply won't accept smaller accounts. Whether through separately managed accounts, institutional share classes with lower fees, or direct indexing approaches that provide tax-loss harvesting opportunities, larger portfolios enable more sophisticated equity management.

KEY CONSIDERATIONS:

• Diversification means more than owning many stocks; diversification requires exposure to truly different return drivers
• Currency hedging decisions can significantly impact returns in international portfolios
• Tax-loss harvesting in separately managed accounts can add meaningful after-tax alpha
• Consider your total equity exposure across all accounts, including business holdings
• Consider building custom secured notes from your concentrated equities that are no longer growing at rapid rates.  This could allow for income off of these assets without selling or realizing the gains

Private Market Investments

Potentially the most significant advantage of substantial wealth and being a qualified individual is access to private markets. Private market access means investment opportunities in companies not traded on public exchanges. This includes private equity, venture capital, and private credit investments that are restricted to accredited and qualified purchasers.

A core goal of a private investment may be outsized return than traditionally available in the public sphere, bearing in mind the increased risk.  There are also important trade-offs in liquidity and transparency. Companies like SpaceX, Anduril, and other rapidly-growing enterprises often provide investment opportunities to qualified investors years before any potential public offering, if they go public at all.

The challenge with private markets isn't finding opportunities, it's accessing the right opportunities and conducting proper due diligence. Many private investments fail completely, making manager selection and diversification critical. At Aventura Private Wealth, our institutional relationships provide access to private market opportunities our clients may not be able to access independently, with the vetting and oversight that sophisticated families require.

KEY CONSIDERATIONS:

• Private investments are illiquid—capital may be locked up for 5-10+ years
• Minimum investments often range from $250,000 to $1 million per position
• Due diligence is critical; not all private opportunities offer attractive risk-adjusted returns
• Private markets should represent only a portion of your overall portfolio
• Tax reporting can be complex and delayed

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Tax-Advantaged Municipal Bonds

For high-net-worth families in elevated tax brackets, municipal bonds often provide superior after-tax income compared to taxable fixed-income alternatives. When your marginal federal tax rate reaches 35-37%, the tax-free income from quality municipal bonds becomes increasingly attractive.

This strategy works particularly well for families seeking current income or capital preservation rather than aggressive growth. A portfolio of highly-rated municipal bonds from diverse issuers can provide steady, predictable income while preserving principal, all with minimal federal income tax and potentially state tax savings if you invest in your own state's municipal bonds.

The municipal bond market is vast and nuanced, with significant differences in credit quality, call provisions, and yield curves across states and municipalities. Professional management or thorough research is essential to avoid the mistakes that retail investors commonly make in this space.

KEY CONSIDERATIONS:

• Calculate your tax-equivalent yield to compare municipal bonds fairly against taxable alternatives
• Diversification across many issuers reduces exposure to any single municipality's financial challenges
• Consider laddering maturities to manage interest rate risk and provide regular liquidity
• Municipal bonds can subject you to Alternative Minimum Tax (AMT)
• Residents of high tax states can benefit more from municipals, location of the purchaser is very relevant to an income plan

Direct Indexing and Tax-Loss Harvesting

Direct indexing represents a sophisticated approach available primarily to investors with substantial portfolios. Rather than buying an S&P 500 index fund, you actually own the individual stocks that comprise the index, enabling systematic tax-loss harvesting while maintaining similar market exposure.

The tax benefits can be substantial. By harvesting losses throughout the year while carefully avoiding wash sales, direct indexing can potentially generate $20,000 to $50,000 or more in annual tax savings on a $3 million equity portfolio, savings that compound over time. These losses can offset capital gains from other investments, real estate sales, or business exits.

Additionally, direct indexing allows for customization that mutual funds and ETFs cannot provide. Want to exclude certain sectors? Overweight specific industries? Match your values through ESG screening? Direct indexing accommodates these preferences while maintaining broad market exposure.

KEY CONSIDERATIONS:

• Requires sufficient capital (often $250,000 minimum per strategy) to own adequate diversification
• Tax benefits vary based on market volatility and your specific tax situation
• More complex tax reporting with potentially hundreds of individual holdings
• Works best for taxable accounts; offers no advantage in retirement accounts
• Technology and professional management are essential for effective implementation

Actively Managed Alternatives

Alternative investments—hedge funds, managed futures, long-short strategies, and market-neutral approaches—can provide diversification benefits and potentially reduce portfolio volatility. The goal isn't necessarily higher returns but rather returns that behave differently from traditional stocks and bonds.

These strategies become accessible and economically viable at the $3 million level and above. Minimum investments are substantial, and fees are typically higher than traditional mutual funds. However, for investors seeking to dampen portfolio volatility or protect against severe market declines, certain alternative strategies merit consideration.

The critical challenge is manager selection. The vast majority of alternative strategies fail to justify their fees. At Aventura Private Wealth, we have vetted the managers of these strategies to ensure performance and processes align with our clients goals.

KEY CONSIDERATIONS:

• High fees can erode returns; scrutinize all-in costs carefully
• Past performance in alternatives is particularly poor at predicting future success
• Liquidity often restricted to monthly or quarterly redemptions
• Tax efficiency varies significantly across different alternative strategies
• Many marketed alternatives provide no meaningful diversification benefit

Strategic Real Estate Holdings

Real estate investments beyond your primary residence can provide portfolio diversification, inflation protection, and potential tax benefits through depreciation. Options range from direct property ownership to real estate investment trusts (REITs) to private real estate funds.

Direct property ownership offers the most control but requires physical labor, local market expertise, and comfort with leverage and tenant management. Property owners will tell you, it is a lot of work.  REITs provide liquid exposure to real estate but trade like stocks and offer potentially less tax benefits. Private real estate funds occupy middle ground, professional management with institutional-quality properties but illiquid capital commitments.

The right approach depends on your objectives and tolerance for complexity. Some families derive substantial enjoyment from direct property ownership and management. Others prefer entirely passive real estate exposure through REITs or funds while focusing their time and attention elsewhere.

KEY CONSIDERATIONS:

• Real estate requires expertise; poor property selection or timing can destroy wealth
• Liquidity varies dramatically across direct ownership, REITs, and private funds
• Leverage amplifies both gains and losses; use cautiously and understand the risks
• Property management is time-consuming unless you hire professionals
• Tax benefits depend on active participation rules and your specific situation
• Geographic diversification helps manage local market risk

Concentrated Risk Positions (When Appropriate)

While conventional wisdom emphasizes diversification, substantial wealth sometimes requires taking concentrated positions in opportunities with asymmetric return potential. This contradicts traditional advice, but for families with secure base wealth, strategic concentration can make sense.

The key word is 'strategic.' This isn't about gambling with money you can't afford to lose. It's about deliberately allocating a defined portion of your portfolio, perhaps 5% to 15%, to high-conviction opportunities with the potential for exceptional returns. These might include early-stage private investments, concentrated public equity positions in companies you understand deeply, or other opportunities where your insight or access provides genuine advantage.

This approach only works for families whose financial security doesn't depend on these positions succeeding. You must be able to lose the entire allocation without compromising your lifestyle or long-term objectives. When sized appropriately, however, concentrated positions can provide the asymmetric upside that transforms good wealth into generational wealth.

KEY CONSIDERATIONS:

• Only allocate capital you can afford to lose completely
• Size positions small enough that failure doesn't impact your lifestyle
• Concentration requires genuine insight or advantage, don't confuse conviction with hope
• Establish clear rules for when to reduce or exit concentrated positions
• Document your investment thesis and review it regularly
• Consider the tax implications of future diversification

Structured Notes and Derivatives (For Specific Objectives)

Structured products and derivatives aren't appropriate for most investors, but they can address specific needs for sophisticated families. These include buffered notes that provide downside protection, callable notes that enhance yield, and option strategies that modify risk-return characteristics.

The challenge with structured products is complexity and embedded costs. Many are marketed aggressively because they generate substantial fees for their issuers. The vast majority are poor investments. However, a small subset of carefully-selected structured products can address specific portfolio needs when other solutions fall short.

Common appropriate uses include: generating enhanced income when traditional bonds offer inadequate yields, implementing downside protection without entirely forfeiting upside, or expressing specific market views with defined risk. Success requires understanding exactly what you're buying, including all fees and risks, and having a clear rationale for why this particular structure serves your objectives better than simpler alternatives.

KEY CONSIDERATIONS:

• Complexity is not sophistication; simpler solutions are usually better
• Understand all embedded costs, which can be substantial and opaque
• Credit risk: structured notes depend on the issuer's financial strength
• Liquidity is typically poor; plan to hold to maturity
• Tax treatment can be complex and sometimes unfavorable
• Never invest in a structure you don't fully understand, regardless of promised returns

The investment strategies outlined in this guide represent just a portion of the opportunities available to families with substantial wealth. The right combination depends entirely on your unique circumstances: your financial objectives, risk tolerance, time horizon, liquidity needs, tax situation, and estate planning goals.

More importantly, these strategies work best when integrated into a comprehensive wealth management approach. Isolated investment decisions—no matter how sophisticated—rarely produce optimal outcomes. True value emerges from coordinated planning across your entire financial picture: investments, taxes, estate planning, risk management, and liquidity management all working in concert.

This coordinated approach is precisely what we provide at Aventura Private Wealth. Unlike large institutions constrained by corporate products and bureaucratic processes, our independence allows us to focus exclusively on what serves your family's interests. We offer access to private market opportunities unavailable through traditional channels, institutional-quality research and analysis, and the personalized service that high-net-worth families deserve but rarely receive.

IS YOUR WEALTH MANAGEMENT STRATEGY
POSITIONED FOR YOUR SUCCESS?

We invite you to schedule a complimentary consultation to discuss
your portfolio and explore whether our approach might benefit your family.

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Aventura Private Wealth

19790 West Dixie Hwy, Suite 805-806

Aventura, FL 33180

305-740-1600

aventuraprivatewealth.com

IMPORTANT DISCLOSURES

The information provided in this guide constitutes general views and educational content from Aventura Private Wealth and should not be regarded as personalized investment advice or a recommendation for any specific security, strategy, or investment product. Nothing herein constitutes a solicitation or offer to buy or sell any security or investment product.

Investing in securities involves risk of loss. Past performance is not indicative of future results. Investment returns and principal value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted.

Alternative investments, including private equity, private credit, hedge funds, and real estate, involve additional risks including limited liquidity, lack of transparency, potential for complete loss of principal, and compensation structures that may incentivize excessive risk-taking. These investments are generally suitable only for sophisticated investors who can afford to lose their entire investment.

Tax consequences vary based on individual circumstances. Consult with qualified tax and legal professionals regarding your specific situation before implementing any strategy discussed in this guide.

This guide is provided for informational purposes only and does not constitute an offer to provide investment advisory services. Aventura Private Wealth is an independent registered investment advisor. For complete information about our services, fees, and conflicts of interest, please review our Form ADV Part 2A, which is available upon request.

Information regarding third-party investment managers, funds, or strategies is based on information provided by such third parties and publicly available information. Aventura Private Wealth has not independently verified this information and makes no representations regarding its accuracy or completeness.

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