Incorporating Private Assets into our strategies, Bitcoin as a portfolio hedge, the problem with not knowing how much is enough, concentrated stock positions, 1929
Dear Friends and Client Partners,
In this week’s Deep Dive we’ll talk about how to avoid the unintentional consequences of staying in a job for the paycheck when you already have enough to move on to something you’re more passionate about.
But first, a quick announcement that I’m particularly excited about for Kangpan & Co. clients.
Firm Updates
Partnerships: Institutional Private Market Access
We secured a partnership with a premier provider of private fund access, specifically designed for independent wealth firms. For clients who meet Accredited Investor standards, this provides a streamlined path into institutional-grade Private Credit, Private Equity, and Real Estate—asset classes that have traditionally been the domain of the world’s largest endowments and family offices. We will be discussing these options with eligible clients in the coming months to determine how private market exposure may complement your current strategy and to review the specific tradeoffs, such as illiquidity and diversification benefits.
Research: Bitcoin as a Portfolio Hedge?
We get lots of questions on whether Bitcoin can act as a hedge against equity volatility. Our recent analysis shows the opposite: it’s increasingly acting as a high-beta equity proxy.
- Review the Research Note
Deep Dive
The Problem with Not Knowing How Much is Enough
When I was getting licensed as a wealth manager, I assumed my primary value to clients would be technical: optimizing asset class returns or uncovering marginal tax savings. That’s why we use all kinds of sophisticated systems at Kangpan & Co. to model expected returns, run Monte Carlo simulations, and forecast dynamic withdrawal bands.
However, these tools can’t answer the truly fundamental questions like:
What are you saving for?
The more people I sit down with, the more I realize my most valuable work is helping clients bring clarity to their vision for their future lives.
Most people I meet with are saving and investing for a desirable but vaguely defined future. It’s usually “early retirement” or a “second act that is more aligned to long-term values.”
But the planning usually stops short of quantifiable specifics. Important details remain unanswered or only loosely defined.
Are you going to keep living in the same high cost of living suburbs that you raised your family in? Do you want to maintain your current lifestyle or enhance it? Are you going to sell the business you’ve built or transition it to the next generation and live off its distributions?
You need to understand what your dream life will actually cost to live. If you don’t know what you’re specifically aiming for, you’ll have no idea if you’re even pointed in the right direction.
Advisors often talk about the risk of not saving enough for retirement… which can be a problem. But it’s a pretty well-understood one.
There is an equally problematic issue that’s not talked about enough: over-saving.
It’s very easy to get caught up in the momentum of the day-to-day and forget what your actual long-term goals for your life are. So you keep working and grinding and saving up more and more. You end up spending years longer than you needed to working in a job that you’re not passionate about that’s slowly eroding the most valuable asset you have, the rest of your life.
You often need far less than you think to step away from what you’re doing today to start that next phase of your life. Some of my most rewarding work so far has been helping people realize they are much closer to financial independence than they imagined.
The key to this assessment isn’t a complex investment product. It is the process of crystallizing and quantifying your goals. Once defined, we can engineer a personalized Playbook to reach—or even accelerate—that timeline.
This is exactly what I did for myself. I sat down in my early 30s and thought deeply about what I wanted from life and then iteratively built a personal Playbook to ensure I was able reach my goals before 40.
I focused on three quantifiable requirements:
- A home Sheila and I both loved that our family could grow into with excellent K-12 public schools
- The ability to go out to different restaurants in the area at least once a week as a family (and there is no shortage of places to try in the Philly area)
- Going on three to four nice vacations together each year
Beyond the numbers, I wanted a post-corporate work life defined by three types of independence:
- Financial independence to build Kangpan & Co. intentionally, choosing only the clients I am best suited to serve
- Schedule independence to ensure I never miss the important moments in the lives of my family and loved ones
- Moral independence to ensure there are no conflicts of interest or compensatory arrangements that sacrifice the objectivity of the advice I provide to clients
Making steady progress against these specific goals over the years allowed me to “retire” from a C-level role before 40. Each month I spent 30-minutes review my Playbook to ensure our costs, savings, and investments were on pace to meet these quantified goals.
Once I hit my target numbers, I shifted my portfolio towards an all-weather, multi-income investment strategy that would support my family’s financial needs in perpetuity. I then started the next phase of my life.
I increasingly think effective wealth management boils down to this:
Envision the life you want and engineer your finances to make it a reality.
That’s what I did for my own family and that’s what I love doing for the families I serve. This ethos is the foundation of Kangpan & Co.’s Personal Endowment framework that I’m steadily building to support our client base.
If you aren’t a client yet but want a thought partner to help you quantify your vision for a more intentional financial future and engineer the strategies to get there, feel free to reach out.
Food for Thought
A collection of articles or books I’ve read that might be interesting to many of you.
- The dangers of holding concentrated positions via AQR: A reminder that the same strategies that made you wealthy are not necessarily the same ones that will keep you wealthy. As AQR notes:
“Although continuing to hold a concentrated stock might seem like a status-quo stance, it is, in fact, one of the most risky investment strategies an investor could pursue, and it is especially problematic for those wealth creators who seek to become guardians of wealth for themselves and their families… Bessembinder (2018) shows that, during the 1926–2016 period, for all the 25,967 common stocks in the Center for Research in Securities Prices (CRSP) database, by far the most frequent one-decade buy-and-hold return is -100%.”
- 1929 by Andrew Ross Sorkin: The first part of the book examines the build up to the crash of 1929 that led to the Great Depression. It’s a fascinating mirror of many of the same dynamics we’re seeing in markets today. I personally wasn’t a fan of the last third of the book focusing so heavily on the nuances behind the passage of the Glass-Steagall act but the entire book is highly readable for such a heavy topic.
Thank you for the continued partnership and for the opportunity to help steer your family’s capital toward what matters most.
Nathan
Founder & Lead Advisor
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Disclosures: This content is for educational purposes only and is not investment, tax, or legal advice. No post is an endorsement of any particular strategy or security. The Personal Endowment is a conceptual investment framework customized to each client and does not represent a specific fund or guaranteed outcome. Asset allocation and yield targets are subject to market volatility. We do not receive any direct payments or commissions for securities discussed in our posts. Employees and clients of Kangpan & Co. may hold positions in securities discussed in posts. Speak with a licensed tax, legal, or financial advisor before making any changes to your investments or financial strategies. Past performance is no guarantee of future returns. Investing involves risk including the loss of capital.
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