A top-rated millennial wealth manager explains why he's risking 100% of his 401(k) in the stock market - and shares other strategies he's pursuing for clients
- Scott Doré - one of the most highly regarded millennials in the wealth management field - told Business Insider that despite some short-term concerns about the stock market, he's willing to stake his entire 401(k) on equities.
- He also told Business Insider about the demographic trends he's targeting to connect his clients to long-term growth in the real estate market.
- Doré is a partner at Evoke Wealth, a new firm in California that manages $5 billion in assets.
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Sometimes a longer-term perspective makes risks look very different than they might first appear.
Scott Doré of Evoke Wealth - a $5 billion firm based in Los Angeles - told Business Insider how that applies to his own retirement plans as well as his work on behalf of clients. Doré was recently named one of the best millennial wealth managers by Forbes, and in an exclusive interview, he revealed an aggressive stance that's still diversified.
In an exclusive interview, he broke down his approach to three major asset classes:
The bull market is more than a decade old and US stocks are near all-time highs again, marking an almost complete recovery from a swoon an August swoon caused by nervousness around the US-China trade war.
Doré says he's concerned that they're vulnerable and valuations are high right now.
"I am proceeding with caution with regard to public equities," he said.
But that short term concern isn't stopping him from taking an aggressive stance on stocks over the longer run, with an eye toward his own retirement.
"My 401(k) is 100% equities, which is quite risky, but I have at least 20 years if not much, much longer for those assets to grow," he said. "I'm 39 and I can't touch any retirement assets until I'm 59 and 1/2 years old, so that's 20 years I have to weather any market turbulence."
Doré says he's keeping his risk profile balanced in other ways, as he has higher concentrations of fixed-income investments and cash in taxable, non-401(k) accounts. That provides diversification and stability while also minimizing the taxes he owes relative to the tax-advantaged 401(k).
Interest rates around the world are heading lower just a few months after the market appeared to be in a rising-rate environment. So Doré argues that the right move today is minimizing the risk of getting caught off-guard.
"I recommend that clients keep duration fairly short on fixed income portfolios," he said. "Having a longer duration portfolio increases the amount of interest rate risk."
He's also discouraging clients from considering lower-quality, higher-yielding bonds as they hunt greater income. He said he believes the bond part of a portfolio should be the safest, not the highest-yielding.
"Taking risk with the conservative part of the portfolio in my mind doesn't make a lot of sense," he said.
With returns in stocks looking dicey for now and fixed income offering limited yield, Doré says alternatives like private equity and real estate are critical ways to diversify. His decisions in the real estate field are guided by two enduring real trends that apply to big portions of the US.
"Because more and more people are renting, and renting for longer, there is an under supply of multi-family real estate around the country," he said. "We've done a few investments in the multi-family space, which in my mind is the safest sub-asset class in real estate."
He added that the aging of the Baby Boom generation also presents a lot of investment opportunities, and it also offers some diversification because it's based around a separate population trend.
"The aging demographic is a theme we believe in," he said, explaining that the graying population should support sustained, long-lasting growth in areas like senior living facilities and medical offices.
He's also investing in funds that develop opportunity zones. The 2017 Tax Cuts and Jobs Act allows investors to defer taxes on the sale of an asset or a business if they invest the proceeds into a federally designated low-income area.
Even if that investment dramatically increases value, they'll only owe taxes on the initial investment. Doré says that when it's time to shift money away from stocks, he'll often use look for an opportunity zone to invest in.
"If they stay invested in that opportunity zone deal for 10 years, all of the gain from that investment is tax free," he said. "It can be a very powerful tool for compounding returns."
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