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.
It is worth noting that these two investigations were carried out completely independently of each other, however, the final result was approximately the same. If to take a closer look at the average millionaire investment portfolio, the following figures can be seen:
- 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%.
As it appears from this list, most wealthy people prefer to invest their own funds in various financial instruments. But statistics can differ, depending on the age of the investor.
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
It is worth noting that investment in education does not mean studying at Harvard or any other university from the Ivy League. This is visiting all sorts of training and seminars, where it is possible not only to get useful and relevant information from the world of investments but also to make useful acquaintances.
- Own business
People under 35 willingly invest money in their own startups. In many areas, starting a business does not demand huge start-up capital. In addition to the opportunity to earn, own business provides the development of business skills and self-discipline.
- Various financial sector mutual funds
This type of investment is ideal for inexperienced investors, so it has increased popularity among young people. To begin with, mutual funds are fairly simple and affordable for the vast majority of people (basically, you can even invest $50). It is also worth noting that such an investment tool allows you to diversify your portfolio as simple as possible. Often, such funds are invested in hundreds of different financial instruments simultaneously. But it is important to understand that such financial instruments are popular not only among young or inexperienced investors – the older generation of wealthy and successful people are also interested in it.
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.
It is also worth noting that rich aged people often risk only with their own funds, while young people actively use loans and borrowings to implement their own projects.
4. Alternative investments
The 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.
Such 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.
The 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.
Antiques and exclusive coins
Such assets are a very interesting direction for investment, as they are fairly stable in price. The turnover of the antiques and exclusive USA coins market was 1.1 billion dollars as of 2017. The reality is that unique items always have a limited edition and therefore they will always be in good demand.
Quite recently, many people were fairly skeptical about investing in wine, but nowadays, this drink is a very valuable asset that can increase the capital of its owner. Now you can even find whole investment funds that are focused exclusively on wine investments.
In this market, as in any other, it is very important to acquire a valuable asset. You probably want to know how profitable it is. The statistic data, which the largest thematic community Wine Owners have kindly provided, show that competent investment in wine is able to bring at 11% per annum.
5. Real examples of billionaire investments
If you want to become rich, you need to think and act like them. Unfortunately, there is no universal recipe for getting rich, but examples of the most successful people in the world should help novice investors. So, let’s take a look at several life paths of billionaires.
Bernard Arnault (about $38.1 billion)
At the moment, Bernard is the richest man in France. His father had his own construction company, in which Bernard began his journey to great capital. There he was able to save his first money, which he invested in luxury real estate. This direction began to bring him a good income, which he successfully reinvested and began buying up luxury items. As of now, he is managing several leading companies that sell exclusive products. The example of Bernard Arnault shows that even alternative investment variants can bear fruit with the right approach.
Steven Anthony Ballmer (financial position about $30.8 billion)
Ballmer began his path to success back at Harvard, which, by the way, he never graduated. It was there that he met Bill Gates, with whom they created Microsoft company. Subsequently, Ballmer became executive director and major shareholder of the company. This is a great example of how a properly selected startup could provide a person with a comfortable living for life.
Patrice Tlhopane Motsepe (financial position about $2.1 billion)
Patrice was born in an ordinary family. He spent 6 years as a full-time lawyer in an American company in South Africa. During this time, he managed to save some money, after which he went to work at the mining company Future Mining. Then he began to invest in the securities of other mining companies. The investment brought good profit and Patrice was able to open his own company, African Rainbow Minerals. His example shows us that even without a huge start-up capital, but with a competent approach to own investments, it is still possible to become a billionaire.
Proper investment of funds is the key to a successful and independent life. Many people around the world constantly earn from investments. There are a lot of opportunities, but also a sufficient number of pitfalls in this field. To succeed in investing, it is necessary to constantly monitor new trends and financial news.
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