While some billionaires prefer to remain somewhat frugal and live below their means, most of them love to drop money on lavish items and unique experiences, spending millions of dollars on supercars, private jets, unforgettable vacations, real estate, colossal yachts or ultra rare collectibles. I’m not talking about just anyone who has over $3 million in the bank either. These are the ways in which the millionaire guards his money through investings.
There are probably few things in this world that are more important than money, especially when you are taking about millionaires. Over the course of the past decade, the number of wealthy people has increased dramatically. So let’s see what do millionaires invest their money in…
Cryptocurrency
It is estimated that there are around 100,000 cryptocurrency millionaires out there with the majority holding Bitcoin. To try to make your fortune in cryptocurrency, you have to be willing to take on some risk and many millionaires don’t have an appetite for risk. You can take a small portion of a millionaire’s wealth and invest in one of the different cryptocurrencies. Plenty of people have become millionaires this way. Some have lost their money. More and more, cryptocurrency is becoming accepted as a legitimate investment that deserves a look when trying to accumulate wealth.
S&P Global
- Market value: $108.6 billion
- Billionaire investor: Rothschild & Company Wealth Management UK
- Percent of portfolio: 10.4%
Rothschild & Company Wealth Management UK is increasingly bullish on S&P Global (SPGI, $450.61). The London-based hedge fund with $16.4 billion in AUM first bought shares in early 2019 and has gradually built up its stake ever since.
Most recently, Rothschild upped its position by 3%, or 47,699 shares. It now owns a total of 1.5 million shares, which were worth $608.7 million as of June 30. SPGI is now the hedge fund’s fourth-largest holding.
Shares are outperforming the broader market by about 17 percentage points for the year-to-date, and they’ve been an even better bet since Rothschild got involved. SPGI has more than doubled since the end of Q1 2019, vs. a gain of less than 60% for the S&P 500.
Analysts are also upbeat on the name, giving SPGI a consensus recommendation of Buy, with high conviction.
Although most investors probably know S&P for its majority stake in S&P Dow Jones Indices – which maintains the benchmark S&P 500 index and the blue-chip Dow Jones Industrial Average – it’s also a central player in corporate and financial analytics, information and research.
Meanwhile, long-term investors keen on dividend growth are likely familiar with SPGI’s status as an S&P 500 Dividend Aristocrat. The company has increased its payout annually for nearly half a century, most recently in January with a 15% hike in the quarterly distribution to 77 cents per share.
Investing Only in Intangible Assets
When people think of investing and investing strategies, stocks, and bonds normally come to mind. Whether this is due to higher liquidity or a smaller price for entry, it doesn’t mean that these types of investments are always the best.
Instead, UHNWIs understand the value of physical assets, and they allocate their money accordingly. Ultra-wealthy individuals invest in such assets as private and commercial real estate, land, gold, and even artwork. Real estate continues to be a popular asset class in their portfolios to balance out the volatility of stocks. While it’s important to invest in these physical assets, they often scare away smaller investors because of the lack of liquidity and the higher investment price point.
However, according to the ultra-wealthy, ownership in illiquid assets, especially ones that are uncorrelated with the market, is beneficial to any investment portfolio. These assets aren’t as susceptible to market swings, and they pay off over the long term. For example, Yale’s endowment fund has implemented a strategy that includes uncorrelated physical assets, and it returned an average of 10.9% per year between June 2010 and June 2020.20 seconds of 0 secondsVolume 75% 2:12
Jack Schwager: Investopedia Profile
Allocating 100% of Investments to the Public Markets
UHNWIs understand that real wealth is generated in the private markets rather than the public or common markets. The ultra wealthy may gain a lot of their initial wealth from private businesses, often through business ownership or as an angel investor in private equity. Additionally, top endowments, such as those run at Yale and Stanford, use private equity investments to generate high returns and add to the funds’ diversification.
Keeping up With the Joneses
Many smaller investors are always looking at what their peers are doing, and they try to match or beat their investment strategies. However, not getting caught up in this type of competition is critical to building personal wealth.
The ultra-wealthy know this, and they establish personal investment goals and long-term investment strategies before making investment decisions. UHNWIs envision where they want to be in 10 years, 20 years, and beyond. And they adhere to an investment strategy that will get them there. Instead of trying to chase the competition or becoming scared of the inevitable economic downturn, they stay the course.
Further, the ultra-wealthy are very good at not comparing their wealth to other individuals. This is a trap that many non-wealthy people fall into. UHNWIs stave off the desire to purchase a Lexus just because their neighbors are buying one. Instead, they invest the money they have to compound their investment returns. Then, when they’ve reached their desired level of wealth, they can cash out and buy the toys they want.
Failing to Rebalance a Personal Portfolio
Financial literacy is a big problem in America, but everyone should understand the practice of rebalancing their portfolios. Through consistent rebalancing, investors can ensure their portfolios remain adequately diversified and proportionally allocated. However, even if some investors have specific allocation goals, they often do not keep up with rebalancing, allowing their portfolios to skew too far one way or the other.
A balanced portfolio typically includes the right mix of cash, stocks, and bonds based on a person’s age and risk tolerance.
For the ultra-wealthy, rebalancing is a necessity. They can undertake this rebalancing monthly, weekly, or even daily, but all UHNWIs rebalance their portfolios on a regular basis. For the people who don’t have the time to rebalance or the money to pay someone to do it, it’s possible to set rebalancing parameters with investment firms based on asset prices.
Omitting a Savings Strategy From a Financial Plan
Investing is essential to becoming ultra-wealthy, but many people forget about the importance of a savings strategy. UHNWIs, on the other hand, understand that a financial plan is a dual strategy: They invest wisely and save wisely.
As a result, the ultra-wealthy can focus on increasing their cash inflows as well as reducing their cash outflows, thus increasing overall wealth. While it might not be common to think of the ultra-wealthy as savers, UHNWIs know that living below their means will allow them to achieve their desired level of wealth in a shorter amount of time.SPONSOREDOpen A Trading Account in Under 5 MinutesOpen a trading account in under 5 minutes and join 400,000 others globally trading long or short on oil CFDs, and access 300+ other CFD products over assets like forex, gold, indices, and shares with an award-winning broker. Trade oil from 0.4 spreads on Vantage FX’s RAW account, and access free education and trading tools with 24/5 phone support. Learn more about trading with Vantage FX and get started today.
Visa
- Market value: $487.2 billion
- Billionaire investor: Metropolis Capital
- Percent of portfolio: 13.4%
Visa (V, $229.09) routinely makes most lists of analysts’, hedge funds’ or billionaires’ favorite stocks. Berkshire Hathaway (BRK.B) owns nearly 10 million shares worth $2.3 billion, although chairman and CEO Warren Buffett readily credits the holding to one of his stock-picking lieutenants.
And indeed, there is much to like about this Dow stock. Visa operates the world’s largest payments network, and thus is well-positioned to benefit from the growth of cashless transactions and digital mobile payments.
Just look at the Street’s consensus recommendation, which sits on the edge of Strong Buy. Of the 37 analysts issuing opinions on Visa tracked by S&P Global Market Intelligence, 22 call it a Strong Buy and 10 rate it at Buy. The remaining five have it at Hold.
“Visa is seeing a continuing acceleration driven by the reopening, as well as the affluent customer beginning to spend more,” writes CFRA’s Chris Kuiper (Buy). “We continue to see investors underappreciating the long-term trend of cash displacement and Visa’s other products and services, such as its continued investments in open banking.”
So it should come as no surprise that Metropolis Capital made Visa its top holding in Q2. The Amersham, England-based hedge fund with $1.4 billion in AUM initiated the position in the first quarter of last year, and portfolio managers Simon Denison-Smith and Jonathan Mills have only become more bullish since.
The duo increased Metropolis’ stake by a third in Q2, buying another 230,186 shares. The fund’s total position of 912,696 shares, worth $213.4 million as of June 30, accounts for 13.4% of its equity portfolio.
V stock is lagging the broader market for the year-to-date, hurt by the spread of the COVID-19 Delta variant. Over the long term, however, it’s been a killer, beating the S&P 500 by about 68 and 670 percentage points, respectively, over the past five and 10 years.
Alibaba
- Market value: $462.8 billion
- Billionaire investor: Polunin Capital Partners
- Percent of portfolio: 34.6%
Polunin Capital Partners really rolled the dice on its newest and largest stock pick. The London hedge fund with $5.8 billion in AUM initiated a stake in Chinese e-commerce giant Alibaba (BABA, $170.71) in the second quarter – a risky bet with potentially huge rewards.
The Chinese government’s crackdown on the country’s technology sector has sparked a steep selloff in the so-called “Amazon of China” and peers. BABA alone is off 27% for the year-to-date.
Apparently Polunin Capital saw a screaming bargain amid all that blood in the streets. It bought 494,200 shares in BABA during Q2 – a period in which shares were off by as much as 12% for the year-to-date. The BABA stake, worth $112 million as of June 30, instantly became Polunin’s largest investment, accounting for nearly 35% of its portfolio.
However, with an average estimated cost basis of $226.78, the hedge fund is down 25% so far.
We’ll have to wait until November’s regulatory filings are due to see if Polunin bought more BABA as it continued to sell off in Q3, but analysts would certainly approve of the move if Polunin did. The Street gives BABA a consensus recommendation of Strong Buy, based essentially on the belief that authorities in Beijing will stand down.
“We think that China will ultimately recognize the importance of letting BABA operate with some autonomy and protect customer and company data,” says Argus Research analyst Jim Kelleher. “Given the company’s market leadership and attractive valuation, we believe that BABA warrants a near-term Buy rating.”
The bulk of the Street has even higher conviction than Argus Research does. Of the 47 analysts issuing opinions on BABA stock, 36 rate it at Strong Buy.
Dana SitarAugust 28, 2021·4 min read
Who wants to be a millionaire?
Even if those words don’t strike a nostalgic chord,you might be eagerly raising your hand, anyway. Because, of course you want $1 million. And it doesn’t have to be hard to start the process of getting there.
If you’ve got $10 and a smartphone in your pocket, you’ve got the tools you need to be on your way to seven figures.
Conclusion
When the recession hit, the rich hoarded their money. And why wouldn’t they? They had more of it than everybody else at the time, so why spend it? As a luxury real estate broker who works with seven-figure price point properties on a regular basis, I know that the very wealthy have not stopped spending just because they have more money than they can spend in several lifetimes. There are plenty of fancy cars, huge waterfront homes, yachts, private jets and high-end collectibles changing hands left and right despite the dour headlines being reported about the “wealthy” holding onto their wallets.