This Is Where The Extremely Affluent Invest 60% Of Their Money

How do wealthy people invest and manage their assets? Despite being wealthy, there is a great deal of variation in the assets of wealthy people with regard to housing, luxury cars, businesses, pensions, life insurance, real estate and liquid assets. There is also a great deal of variation in their investment targets and allotments.

The consumer finance survey conducted by the Federal Reserve System (FRS) in 2016 regarding the investment trends of assets with values in the range of $10,000 to $1,000,000,000 showed that wealthy people tend to invest in multiple items. From this, it is clear that investing leads to an increase in assets. From this point on, we will be able to imitate this and learn “the secret to increasing your assets”.

People with Assets in the $10,000 to the $100,000 Range Purchase Homes while those who have Assets that are Greater than $10,000,000 Make Investments that are centered on Businesses.

This survey was created by the market information site “visualcapitalist.com” using data taken from the Federal Reserve (Article: January 19, 2018).

The main investment target of those with assets in the range of $10,000 to $100,000 is personal property, with 40% of their total assets invested. After investing in personal property, those with assets in the $10,000 range then prioritize making investments in luxury cars, pension funds and liquid assets. Those with assets in the $100,000 range prioritize investing in their pension funds and invest about the same amount in luxury cars and liquid assets. They also actively invest in businesses and real estate.

Housing and retirement savings make up the majority of investments for those with assets in the $1 million range, with a narrow margin put towards businesses. The proportion of investments put towards real estate and mutual funds is slightly lower.

The situation changes dramatically for those who have assets in the $10 million range where 40% of their investments are put towards businesses. Investments in mutual funds come second to business investments, followed by real estate and stock investments.

Those with assets in the $100 million range invest 50% of their assets into businesses. The rest is invested in mutual funds and stocks. Of those with assets in the $1 billion range, roughly 60% of their investments are placed into businesses, stocks and mutual funds.

The greater the value of the assets, the greater the investment into businesses is. Wealthy people with fewer assets tend to invest in housing.

A $50,000 Investment Grew to $1,000,000? The High Appeal of a Business Investment

Business investments are one of the most effective means of increasing one’s assets. Many wealthy people such as the CEO of Amazon, Jeff Bezos and Warren Buffett “the Oracle of Omaha”, launched their own businesses to build their wealth. Wealthy people like them are never satisfied with the success of a single business, and steadily increase their assets by repeatedly acquiring and investing in additional businesses.

The Toronto based financial and business writer Brian Bosie Ski has said that “those who think entrepreneurship is not suitable for investment will never become super-rich” (Article: May 1, 2014 BBC). Behind the scenes of the active investments that have been made in startups in recent years, the investment trends of the wealthy have been in businesses.

However, there is no guarantee that one can increase their assets by simply investing in businesses. USA Angel investor David Rose points out that “50% of startups are destined to fail”. On the other hand, he says that “only one or two startups that have been invested in will succeed, of which, the investment capital returned will be 20 to 50 fold”. Mr. Rose himself has invested between $50,000 to $100,000 dollars in a single company and experienced a return of $1,000,000.

This allows one to understand the mentality that the more your assets increase, the greater your eagerness to invest in businesses will become.

You Can Invest in Art, Luxury Cars and Real Estate without Being Wealthy if you Use Funds in a Practical Manner.

“Passion Investments” (investments fueled by passion) such as investments in luxury cars, art, watches and wines are also popular among the wealthy. Rather than increasing assets alone, it seems to be better to consider the attached asset value of a collection that began from a hobby.

Actually, one can begin to invest in these types of goods relatively easily without being wealthy. It is possible to invest through a fund, even at a price that does not go hand in hand with the real thing. An example of this is a “Wine Investment Fund” which can be invested in starting at £10,000, and an “Art Investment Fund” (Art Investment Trust) which is made up of a portfolio of contemporary art.

Guy Hudson, the executive director and director of the business development department of the investment company Stonehage Investment Partners says that, “if you invest in an up-and-coming artist, you will not see any losses.”

Investments into real estate, including major property investments are also standard investments made by wealthy people. They vary from purchasing commercial real estate jointly with others, or purchasing real estate in large international cities such as London and New York.

Paul Patterson, vice president of RBC, RBC Wealth Management in Canada, says that, “In general, wealthy people possess real estate in two or three places.”

Even if it is impossible to make an investment of that size, you can purchase one affordable property and profit from it by leasing or reselling. Alternatively, one can invest in a “REIT (real estate investment trust)”. (Article: May 1, 2014 BBC).

Can Risks be Reduced with Robust Investment Strategies and Long-term Plans?

The general public tends to aim to invest in mature markets that usually have reliable returns. However, the extremely affluent investor will actively invest in emerging markets. According to the Investopedia article published on the 27th of December 2017, Indonesia, Chile and Singapore are particularly popular investment destinations.

They say that by prioritizing undisclosed stocks and private equity funds over public stocks, one can expect higher returns.

On top of that, unlike small investors who concern themselves with the investment strategy surrounding their investment after they have made it, one should first decide upon the investment goals and long-term strategies before making an investment, thereby identifying the risks involved and mitigating them as much as possible from the start.

(By ZUU Japan)

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