The substantial majority of millionaires have earned their money through entrepreneurial pursuits rather than through inheritances and protecting their money for the present and building a legacy for future generations. Some have a misconception that the ultra-rich do nothing but spend money. In reality, many are frugal, choosing instead to place their funds in investments that will continue to grow.
Common investment strategies favored by millionaires and billionaires include putting money into a variety of different investment vehicles. After designating a certain percentage of assets to a highly liquid emergency account, they invest in financial banking strategies and in assets, like stocks, cryptocurrency, mutual funds, retirement accounts, art, precious metals, real estate and more.
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Studies show millionaires keep an average of 25% of their wealth in cash or in an easily liquidated equivalent, such as treasury bills, C.D.’s, or money market mutual funds for emergencies. Cash provides insurance against market downturns, and the private banks work with managing the liquidation process automatically when necessary.
Another popular option among investment strategies for HNWI is investing in real estate. Many millionaires have large real estate portfolios. They are a reliable source of passive income and are traditionally a lucrative long-term investment.
Unlike buying and selling real estate, participating in hedge funds is an investment strategy only available to the affluent individuals. Hedge funds are private equity funds and are under fewer regulations than public funds. They also require those who buy in to be accredited investors with a minimum net worth.
Commodities, like gold, silver and mineral rights, may also be part of a high asset portfolio. Other similar investment options with intrinsic value include fine art, rare books, valuable musical instruments, and vintage cars.
The ultimate goal is utilizing diversification to ensure growth while maintaining a strict balance between risk and return.
When discussing HNWI investment strategies, that strive to provide growth, shield assets, and reduce risk, offshore trusts are a larger part of the conversation. They protect assets from creditors, lawsuits, and other risks. Click this link to read more about how an offshore trust really works, and contact our office if you have questions or concerns about asset protection.