While there’s no shortage of information about the lives of the wealthy, one subject that doesn’t get touched on nearly as much is where they store their wealth. Of course, they can’t keep their money solely in banks, as liquidation would leave them bankrupt. Instead, rich people make smart investments with their wealth in the form of stocks, bonds, mutual funds, property, land, precious metals and more.
Putting your money in the bank or investing?
Wealthy people understand that lodging all their money into a bank is about as useful as hiding it under the mattress. By doing this, you are benefitting the bank rather than yourself- the investor. Instead, the rich understand that if they invest their money right, this can make even more money and accumulate their wealth. To find out more, we spoke to Alex McEwan of The Wealth Consultant who takes us on a journey to discover the highs and lows of investments most favoured and most conducive for the ultra-rich.
- Stocks
Stocks are a share of a company that can be purchased by investors who share the profits and losses made by the company on the stock market. The stock market is a risky old world but the rich do well by investing in the stock market because they are patient and strategic thinkers, often weathering the storm and holding stocks through the downturns – no panic selling or need to cash in to minimise losses. The third richest man in the world, Warren Buffett is estimated to be worth $67.8 billion. He has dedicated his life to choosing the best stock investments and now his holding company, Berkshire Hathaway owns stakes in the world’s most successful companies like Coca-cola, American Express and Heinz.
- Bonds
While stock is equity, bonds are more like a loan an investor makes to the company. The wealthy favour bonds as they pose a low risk and tend to be a pleasingly slow and steady investment. They are less volatile than stocks and provide a consistent income from an investment portfolio. Another bonus is that there is a degree of security with bonds, for example, if a company goes bankrupt, bond holders get paid out before shareholders do. As the rich are usually in it for the long-term, bonds work particularly well.
- Mutual Funds
Mutual funds are attractive investments for the wealthy because they can invest their money and leave it to the fund manager to wisely invest in off-shore funds, property funds, exchange-traded funds and investment trusts. As the money is spread across several different companies, investors don’t risk losing their wealth with one bad performance.
- Property
Property is a great investment because it is predictable, stable and performs well as an investment even when the markets start fluctuating. One such high profile investor who has developed a property portfolio to rival royalty is singer/songwriter turned property tycoon, Ed Sheeran who has invested an eye-watering £200 million in property over the last 8 years.
~Novel Serialisation: Heavens Fire~
- Precious Metals
Rich people love precious metals, silver and gold. Not only do they look good, but they never lose their value. Investors tend to procure precious metals, coins, gems, or gold and store in a secure facility such as a bank or brokerage firm. While these items are consistently valuable, they are subject to supply and demand just like any other market commodity.
- Land
Land investment can be surprisingly lucrative. Billionaire British investor James Dyson owns sustainable agriculture firm Beeswax Dyson Farming and owns 33,000 acres of land across England. Last year, he received £1.8 million in farm subsidy payments for owning farmland. So, it seems, the more land you own, the more money you get. The investment also means his children may avoid millions of pounds in inheritance tax as it’s not paid on farmland.
- In other businesses
Investing in other businesses is a common occurrence with the wealthy – think Dragon’s Den, where the investors invest a portion of money for a share in new business. Jeff Bezos, the second richest person on the planet (worth $109 billion) invests in start-ups through his company Bezos Expenditions and generates huge returns through his shares in Amazon.
So, what can we learn from how the wealthy store their money?
The wealthy spread their wealth through different investments to ensure things don’t go awry in one wrong move. They take time to research and understand potential investments before committing. When they do invest, they are usually in it for the longer-term and refrain from buying and selling based on emotions.
There’s plenty of scope to emulate the ultra-rich and think about how they invest, but whether you choose to try out stocks, property or mutual funds investment, it requires skill, expertise and a great deal of patience. If you are confused about where to start, we recommend seeking financial advice from a wealth consultant who can introduce you to the appropriate wealth manager. Professional guidance will empower you to navigate your financial decision-making process and take ownership of your financial future.
