The term “HENRY”—short for “High Earner, Not Rich Yet”—has been popping up more and more. It refers to people earning strong incomes, but whose wealth is still largely tied up in career growth, business ventures, or equity compensation. It’s a promising position, but it also creates some planning challenges that aren’t always obvious at first.
HENRYs often find themselves pulled in two directions: they want their money to grow over time, but they also need enough on hand for near-term expenses. That’s where smart asset allocation comes in, creating a mix that supports both flexibility and future growth.
Here are a few key strategies I walk HENRYs through when we’re building a plan that balances access to cash today with long-term wealth growth.
Investment Strategies for HENRYs: Prioritize Long-Term Growth With a Diversified Portfolio
While liquidity is important, time is a HENRY’s biggest asset. HENRYs can afford to take on slightly more risk in pursuit of larger potential returns due to their longer investing horizon.
To mitigate risk, assets should be dispersed across a variety of asset types in a well-diversified portfolio, including:
- Equities (stocks): A sizable amount of a HENRY’s portfolio should be made up of growth-oriented equities, public or private. Long-term returns from stocks have historically been the largest, despite their short-term volatility. Consider a combination of small-, mid-, and large-cap stocks. If you’ve built significant wealth through equity compensation through your employment, be mindful of concentration risk. While concentration can build wealth, the opposite is also true when things go south for your company and your employment. Holding too much of one stock, especially your employer’s, can leave your portfolio exposed. Strategically diversifying over time and using strategies like a 10b5-1 plan or reducing your holdings when an opportunity arises with a non-public company can help you systematically reduce exposure without trying to time the market.
- Fixed income (bonds): Although bonds often yield lower returns than stocks, they are essential for stabilizing portfolios and lowering volatility, particularly in times of market decline. Think about investing in a mix of government and high-quality corporate bonds.
- Real estate: For HENRYs, owning a home is typically a significant asset that offers both tax breaks and appreciation potential. Beyond their primary residence, some HENRYs may think about investing in real estate as a means of creating passive income and building long-term wealth. If actively managing properties isn’t appealing, consider REITs or private real estate funds that provide exposure without requiring direct involvement. Most busy HENRYs are focused on their growing careers and families, and do not have time to be landlords.
- Alternative investments: HENRYs may look into hedge funds, venture capital, or private equity when their income increases. Although they frequently have greater risk, less liquidity, and require more due diligence, alternative investments can potentially yield better returns. But watch out for deals that sound too good to be true–because they usually are. Always get a second set of eyes to review long-term illiquid opportunities (like the team at Solidarity Wealth).
Investment Strategies for HENRYs: Balance Growth With Liquidity
HENRYs must prioritize growth, but they must also have enough cash on hand to cover unforeseen expenses. These are my suggestions:
- Emergency fund: This is non-negotiable. HENRYs should try to keep three to six months’ worth of living expenses in a money market fund or high-yield savings account. This acts as a vital safety net against unforeseen circumstances like medical emergencies or job loss.
- Tax-advantaged accounts: In addition to providing flexibility, maximizing contributions to tax-advantaged retirement plans, such as 401(k)s and IRAs, is essential for long-term growth. In certain situations, these accounts can be tapped into, however, there may be tax ramifications.
- Brokerage accounts: These accounts are more flexible than retirement accounts, allowing for withdrawals at any time without penalty (though taxes apply). Although long-term growth should be the main goal, holding assets in a brokerage account provides a liquid pool beyond the emergency fund.
- Laddering CDs or treasuries: These financial instruments can yield slightly higher returns than savings accounts for short- to medium-term savings goals (such as financing a major purchase or a down payment on a second home).
Ongoing Adjustment
It’s critical to remember that there isn’t a one-size-fits-all investment strategy for every HENRY. Each person’s unique situation, such as risk tolerance, time horizon, debt levels, and financial goals, should be considered.
For example, a HENRY who has a high risk tolerance and no pressing financial needs, might allocate a bigger percentage of their money into stocks. Whereas someone who has significant debt or plans to buy a house soon might prioritize liquidity and more cautious investments.
Reach Out for Customized Investment Strategies for HENRYs
HENRYs are in a transitional phase of wealth accumulation, earning high incomes but still working toward long-term financial independence. The key to financial success isn’t just investing aggressively; it’s finding the right balance between liquidity, growth, and risk management.
At Solidarity Wealth, we specialize in helping high-earning individuals build multi-generational wealth while maintaining the financial flexibility they need to take advantage of opportunities as they arise. If you’re looking for a tailored investment strategy that aligns with your goals, we’d love to help.
Let’s have a conversation. Reach out to us at info@solidaritywealth.com or call 385-374-1665 to schedule a discovery call.
About Jeff
For over a dozen years, Jeff McClean has advised some of the country’s most successful families on all aspects of their wealth. With his background as a former tax and estate planning attorney at a prominent Houston, Texas, law firm, Jeff has advised clients through business sales, funding rounds, IPOs, complex tax and wealth planning transactions, private and public market investments, executive compensation packages, succession planning, and much more. In short, Jeff helps clients navigate the unique challenges that come with building wealth and helps them better predict their financial future.
In addition to co-founding Solidarity Wealth, Jeff advises single-family offices on a broad array of challenges. He also serves as the Managing Partner of Solidarity Capital, an income fund managed separately by the Solidarity partners.
Jeff is a sought-after thought leader on a wide range of tax, finance, and estate planning topics. Jeff has been quoted in Yahoo! Finance and Kiplinger’s, has published in diverse publications from Silicon Slopes magazine to the Taxation of Exempts journal by Thomson Reuters, and has spoken to audiences ranging from the Estate Planning Section of the Utah State Bar to the Nonprofit Organizations Institute to large company conferences.
Jeff holds a bachelor’s degree in accounting from Brigham Young University – Idaho and a Juris Doctor, with honors, from the University of Texas School of Law. Outside of work, Jeff is married and the father of three amazing children. He has also served as past president of the Salt Lake Estate Planning Council.
Solidarity Wealth is a registered investment adviser. This material is solely for informational purposes. Advisory services are only offered to clients or prospective clients where Solidarity Wealth and its representatives are properly licensed or exempt from licensure. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. No advice may be rendered by Solidarity Wealth unless a client service agreement is in place.
