How to Manage Capital Correctly or Where Billionaires Invest?
Competent investments and capital increase are one of the most exciting and interesting cases in human life. We are all accustomed to expressions like: “Money can’t bring you happiness” or “Money is not everything.”. Of course, they have their share of truth, but after all, a wealthy person feels much more confident: he does not worry about tomorrow and does not think about how he will feed his family if he is fired from work and he does not have to sell real estate, if a force majeure situation occurs in his family. This short list of the advantages that a rich person has is already a good motivation to start investing and become a successful person too. In this article, we will talk in detail about how rich people manage their capital. As you know, the best way to learn how to do something right is to look at specific examples. Everything is relatively simple - if you want to become millionaires, then you need to learn from millionaires.
1. Where do wealthy people invest their money?Large-scale researches are constantly conducted to find out where exactly the rich and successful people invest their own money. In today's material we will refer to two of the most famous ones:
- The World Wealth Report is an annual report about the state of capital made by experienced financial experts.
- Research of Knight Frank & FPB Private Banking is large research that was conducted by a large consulting company and a bank. Its main goal was to show to wealthy clients of the bank where exactly millionaires are investing.
- Securities, stocks, futures - 28%;
- VIP class residential real estate - 20%;
- Own business - 20%;
- Cash - 14%;
- Commercial property - 10%;
- Alternative investments - 5%;
- Various luxuries and antiques - 2%;
- Gold, silver, diamonds - 1%.
2. How exactly do young investors invest?To understand where exactly rich people invest their money, it is necessary to know their age first of all. Based on statistical data, young investors prefer to invest in:
- Own education
- Own business
- Various financial sector mutual funds
3. What are the features of investments of older generation people?To answer this question, we again need to turn to statistics, and it tells us that older people have much more conservative views, so they prefer to invest their capital in traditional financial instruments. The list of the most popular directions is the following:
- The wealthy people of older age, unlike young millionaires, are more tending to real estate investment.
- As practice shows, investment in gold, precious metals and stones is a fairly profitable and easy way to earn money. These assets are not subject to increased volatility; over the long history, they have proven that they can maintain their value even in those times when the rest of the market is crumbling (for example, Black Wednesday, September 16, 1992). Many investors, especially from the older generation, prefer to keep part of their capital in precious metals.
- Stock market investments. "Old school" investors prefer to invest their capital in tangible assets or securities, while investors of the "new generation" often invest in the development of their own company. According to a study by MagnifyMoney, more than 60% of investors over 35 years old prefer to invest their money in the stock market. Potentially, it is possible to earn very good money here, but thoughtless actions can lead to significant financial losses. There are two ways to earn money in the stock market - income from dividends of companies, or directly on the acquired assets value increase. Experienced investors are able to balance their portfolio correctly between dividend and ordinary shares. After all, as it is known, the profit from dividends is an excellent tool for reinvestment and subsequent increasing of its capital.
4. Alternative investmentsThe global financial crisis of 2007–2008 made many wealthy people start looking for new and promising areas for investment. So let's find out in what alternative markets wealthy people invest their money to survive in moments of high volatility.
Exclusive propertiesSuch an investment option involves the acquisition of special real estate, which is not a market asset, in the traditional sense. For example, it may be a house that has its own history. Of course, architectural monuments (such as the Colosseum or Petrodvorets) cannot be bought, but it is not very difficult to purchase a house of the 18th-19th centuries. Such real estate is not subject to global economic fluctuations, and its value only increases over time.
Art objectsThe overwhelming majority of wealthy investors buy art objects since such assets are literally always in value. And their value only grows over time. There are two ways to earn with the help of art objects:
- on increasing their value;
- rent them out in galleries or open your own.