A common question we hear from clients is “What are the wealthy investing in?” or something along the lines of “What’s the secret?”. Well the long and short of it is there is no secret sauce to investing, but there are quite a few sauce options! We will review some of these options and see how the wealthy are taking advantage of these opportunities.
- Believe it or not, Bonds are a staple of the portfolios of the wealthy. These are the “Steady-eddy” return type of investments, but they serve the central purpose of a wealthy portfolio: Capital Preservation. Within Bonds, there is a spectrum of risk that can be taken on to add to the yield. Many Wealthy investors go with highly rated municipal bonds to avoid taxation and have steady growth!
- Real estate is another asset class that is a staple of the portfolios of the wealthy. They utilize this as a dual purpose vehicle. The first way it is used is for income generation, where they receive rent or dividends from the property or Real Estate Investment Trust itself. The second is for store of value, meaning that real estate is limited so the value of it is most likely to maintain over time
- The most common asset class that people assume the wealthy make their money through is the stock market, but just how do they do it? The stock market can be a complicated place with more fugazi than a sketch comedy troop, however if managed correctly can be a wonderful vehicle to build and maintain wealth. The majority of wealthy investors utilize dividend paying stocks and invest solely in companies with strong revenue, price to earnings, profitability, low debt, and strong cash flow. These metrics are the fundamentals on which strong stock investing is built.
- The only thing better than owning a part of a successful public company via stock investing, is owning a piece of a successful private company via capital investment. This is something the wealthy frequently do as they have the large sums or sweat equity required to become involved in the investment. Private ownership provides direct dividends and the potential for a large market gain upon the company being sold or going public.
- This is a great way for the wealthy to find additional diversity in store of value. The wealthy value art and collectibles highly and there is a strong market for this style of investing if the remainder of your portfolio is well balanced.
- The modern technological gold rush of cryptocurrencies is currently catching on to hedge funds and high net worth investors, finding Bitcoin and other cryptocurrencies have strong value through their principals, technological function and utility, and their ease of use. There are quite a few cryptocurrencies that are growing in popularity: Bitcoin (considered a store of value or nicknamed “internet gold”), Ethereum (Seen as a verifiable transaction and app hosting platform, basically a safer transactional internet), and Chain Link (A strong cryptocurrency that confirms real world happenings with electronic Contracts, verifying in live time). Cryptocurrencies are HIGHLY Risky and volatile, they are not for the weak stomached or those who have low risk tolerance, however they are being used by the wealthy to help store value and shape the future of the internet commerce space.