You’ve probably heard about the lifestyles of the rich and famous, but have you ever thought about what the rich and famous do differently when it comes to their financial choices? While many of us are busy trying to earn a paycheck, the richest people are the experts at building and managing assets. These assets give them a solid foundation to build on their wealth, and like all foundations, they are the basis for which all growth may come from.
The types of assets the richest people own may be surprising, but they’re not as out of reach as you’d think. You may not be able to invest the way they do sometimes, but it still helps to know what types of assets the rich consider most important. Take a look at the key assets that 97% of rich people have in their portfolios.
Private Equity
A big asset for many wealthy people is private equity. It means putting money into more privately held business enterprises, usually by way of a venture capital or private equity fund. These investments are high risk and high return. Private equity is a way for those well connected or with the right financial resources to get in on exclusive deals and be able to see potentially large profits over time.
Businesses and Startups
Most of the rich people become rich by owning or investing in businesses. Business ownership is an opportunity to have control and grow, whether it’s starting your own company or purchasing shares in a startup. Many wealthy people are aware that if operated properly, businesses can produce perpetual income streams and produce quite large returns.
Collectibles and Art
When you’re just starting your wealth building journey, art, collectibles, and other tangible assets are often overlooked, but for the rich, they can be incredibly valuable. The price of rare paintings, vintage cars and limited edition items can really shoot up when it’s the right time. These assets are not only full of personal value, but can be sold at auction or privately for tens of thousands, if not hundreds of thousands of dollars.
Precious Metals
The wealthy use precious metals like gold, silver and other precious metals as a timeless asset to hedge uncertain economic times. You may also use precious metals as store of value when the inflation is high or economy is weak. While physical metals or gold backed assets can offer the rich a hedge against the devaluation of their wealth, and a way to diversify their assets.
Intellectual Property
Another asset that rich individuals hold is intellectual property like patents, trademarks, and copyrights. The revenue generated by licensing or royalties can be on going based on these intangible assets. Intellectual property provides a way for people to create or put money into the creation of new products to make money off of ideas and inventions that could earn them hundreds of thousands of dollars over time.
Real Estate
The wealthy own a lot of assets, but real estate is one of the most common. Most rich people have more than one real estate investment like rental properties, vacation homes and commercial buildings. Apart from always going up in value over time, they also generate a rent income stream. Real estate is often a long term investment strategy that keeps you financially stable and growing.
Stocks and Bonds
Classic investment assets such as stocks and bonds tend to account for a high proportion of wealthy people’s portfolios. Dividends and interest from owning shares in established companies or owning government bonds, and long term capital appreciation, are what the rich use to earn more. The best way to manage risk is to invest in a diversified mix of stocks and bonds continuing their wealth growth steadily.
Cash and Liquid Assets
Rich people have plenty of other assets, but they make sure they have some cash reserves or liquid assets they can use in the event of an emergency, or for any opportunity that comes their way. They always have a certain percentage of this wealth in liquid assets, i.e. cash or other high liquid investments, that they can quickly adjust to the market trends, purchase new opportunities , or cover sudden expenses without having to sell even one other investment.
Alternative Investments
As well as the old standard of stocks and bonds, wealthy people tend to branch out into alternative investments like hedge funds, commodities and, of course, cryptocurrencies. Firms can diversify away from traditional classes of assets and embrace opportunities to earn higher risk, higher reward. While alternative investments can be volatile, they can also lead to huge wealth accumulation for those with the know how and resources to navigate them.
Life Insurance
Life insurance policies are used as an asset by many rich people. Besides, providing a death benefit to those that are left behind, some of them, like whole life or universal life insurance, accumulate cash value over time. These are also wealth management policies, with their tax advantages, and a way to transfer wealth in a structured fashion to heirs.
Rental Income Properties
Rental income properties are a great way for the wealthiest to generate passive income. These all have predictable and consistent cash flow and appreciate over time adding value to their hustlers’ portfolios. To be successful with rental properties, you need to know the market, keep the property in tip top shape, and make sure there is a constant demand for renters.
Luxury Goods
High end watches, designer clothing, and especially exclusive jewelry can sometimes be defined as financial assets. However, if bought sensibly and well cared for, luxury items can grow in value as you can turn round sell them for a profit. For many wealthy people, these assets are a status symbol and store of value.
Tax-Deferred Investments
For wealthy people, tax deferred investments like IRAs and 401(k)s are common assets that grow their savings without paying taxes until they withdraw. The rich can help their money compound and lower their income subject to tax by contributing to these types of accounts. This is a wealth building strategy that also makes sure you don’t pay more tax than you have to.
Education and Knowledge
Their own education is one of the richest assets that many wealthy people invest in. They keep themselves one step ahead of the curve when investing in their businesses and investments, formal degrees to specialized knowledge and skills, entrepreneurial and ongoing. Knowledge is an asset that the rich know can be used to create opportunities and further wealth.
Disclaimer: This list is solely the author’s opinion based on research and publicly available information.
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