Tuesday, November 21st, 2017

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Wall Street: Do As We Say Not As We Do

Most financial managers prefer to keep their money in stable investments like cash.Big-time financial executives often do not follow their own investment advice, according to The Wall Street Journal.

Particularly in regard to large corporations and major investors, the financial sector has pushed the idea of derivatives as a means of controlling the risk of a portfolio. Some amount of risk is seen as necessary in order to see a reasonable return on investments.

In an informal survey, however, the Journal found that many executives keep the majority of their wealth in the most stable assets available, primarily cash and Treasurys.

Several executives expressed an interest in minimizing risk to the greatest degree possible, but one expert noted that this stems from a different set of financial circumstances. While most Americans have little enough for the present and less for the future, executives already have enough to live on and mostly need only be concerned with maintaining that wealth.

"For young people taking risks is not a luxury, it is a necessity," Professor Meir Statman of Santa Clara University told the Journal. "The notion is that if you are rich you can take more risk but you don't have to."

The move to preserve wealth is ostensibly tied to the dramatically rising demand for gold, as worries about the economy have pushed many away from stocks and numerous debt crises have roiled the Treasurys market.

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