Things that the rich have that the poor don't
Have you ever wondered where the rich get their money from?
Or rather, what do they spend their money on? Well, most of these high net worth individuals have assets as alternative investments. These are things that the poor rarely focus on such as expensive wine, vintage cars, fine art, property rights in private companies, etc. On average, it is estimated that the rich have invested more than 50% of their money in these assets. So here are some places that really rich people keep and pump their money.
11. Commercial and private real estate
Real estate is still a popular asset for the wealthy. For more than 200 years, investing in real estate has been a preferred investment to make money and one of the best ways for the wealthy to build and maintain their wealth. The trend started with the purchase of the main house and then the other apartments, usually for rent. After purchasing personal real estate, they started buying commercial real estate such as office buildings, hotels, stadiums, and bridges. Statistics show that most of the rich own a large real estate portfolio. Not only that, wealthy people tend to prefer "exclusive" properties. This is the type of real estate that doesn't hit the market very often. It is rarely used to achieve a significant return. Alternatively, this may be some form of the historic building. As long as they maintain their value, the rich are happy. No poor person will see value in an old historic country house from the 17th century. Instead, they will look for a condominium where they can live forgetting that the historic building may have a huge profit opportunity in the future. Also, wealthy people tend to focus on commercial real estate like shopping malls, bridges, etc. In this way, they can expand their investment portfolio and expand their sources of income.
10. Cash and cash equivalents
Many, and perhaps most, millionaires are frugal. This does not mean, however, that they do not have the money to roam. They are very keen on growing their wealth or spending it on really important things.
They do spend on some luxuries too, but the general rule is that they are mostly frugal. Many wealthy people store much of their money in cash or liquid cash equivalents. In this case, the poor do not have the luxury of walking around with a pile of cash.
The wealthy even have private bankers who keep up with their asset portfolio, too. This means that they don't have to queue up at checkout windows as other customers do. Did you know that on average, millionaires own up to 25% of their money in cash? This is to compensate for the market downturn and to make cash available as portfolio insurance. They are also interested in cash equivalents and financial products that are as fluid as cash. Examples of cash equivalents are money market funds, certificates of deposit, commercial paper, and Treasury bills.
9. Luxury goods
such as rare whisky, wine, and handbags You will be shocked that rich people do not purchase expensive luxuries simply because they have nothing better to do with their money. Real estate agent, Knight Frank is among the people that shed a light on how profitable luxury goods such as rare whisky can give you a fortune in returns. Rare Whiskey reaches the pinnacle of the latest Knight Frank Investment Index (KFLII), revealing that China and the wider Asia Pacific Ultra High Net Value Individuals (UHNWI) are pushing the new rare whiskey market to dizzying heights. Handbags are also officially in the asset class. According to a new report, handbags last year were a much better investment than art. Art recorded a total return of 5% in 2019, but handbags increased by 13% and are number one in the year. If you know anything about handbags, you know that Birkins are the holy grail of handbags and only the rich can afford a piece of this pie. If you’re enjoying this video or learning something so far, you’ll love the upcoming points, so do me a favor in the meantime and give this video a thumbs up.
8. Gold or Silver
In the past, trading was a common thing, especially the gold trade. It was the form of money that the wealthy used to establish high status or ownership. Not much has changed. Although the poor would not even dream of holding gold, the rich still used it as an asset, and gold became a place for the rich to store their money. It makes sense that gold will always have a lot of value when fiat currency is weak. History has shown us time and time again how wealthy people survived simply by buying large amounts of this coveted mineral. The good thing is that there is a type of gold for everyone. If someone wants to invest a small amount, they may decide to buy gold coins. Those with a lot of money may decide to buy gold bars that they can store in a physical vault in a foreign country like Switzerland. Note that the rich do not store large amounts of gold in the United States. Current legislation provides, in the event of a crisis, the right of the US government to raid and confiscate safes containing gold, one of the only countries in the world with this right. This has already happened once before under Franklin D. Roosevelt during a period of economic crisis. This is why the wealthy make a concerted effort to store much of their wealth abroad. Gold is desirable because it is easy to buy and will never go out of fashion. But more and more rich people are looking for other precious metals. Precious metals such as titanium and platinum are used to build many electronics, making them prized by companies and governments around the world. Although these precious metals are not as popular as investing in gold, they can be used in practice. It is not surprising to see that they are popular among wealthy investors.
7. Artwork (Fine Art)
One of the reasons rich people own so much fine art isn't because they've fallen in love with every image and background. They know it has great value. Even if the concept of art does not make sense to you, fine art will always have someone who wants to buy it, and those who want to buy it understand its value. They don't try to haggle every cent, which makes this a good investment. On the other hand, the poor may see art as a waste of money, and the money can go for other more important expenses or uses. However, the truth is that fine art has a lot of resale value, especially limited edition art that is in demand. Many wealthy people want to spend millions on fine art. Not only that, fine art can go into the asset fund and generate passive income. Some wealthy people collected enough fine art to open private galleries or rent their artworks to famous galleries. This means more money!
6. Private credit
Private credit is an asset class of privately negotiated loans and many other forms of debt financing from non-bank lenders. It can include (but is not limited to) small business loans, enterprise debt, consumer loans, bill factoring, and various forms of private debt. Most people do not have this type of asset financing because they simply do not qualify for one. The rich have it easier because most of them have a financial record to show a decent credit score history as well as their support unlike the poor. This example shows that the lack of money makes everything more difficult.
5. Speculation (cryptocurrency)
Most people didn't buy into this madness but rich people like to take risks. Especially the risks that promise some high returns. It is estimated that there are around 100,000 crypto millionaires abroad with the majority owning Bitcoin. The idea alone can challenge any poor person because cryptocurrency uses a lot of technology to handle, maintain and handle. Things that most poor people cannot access. The good part is that you don't have to risk that much to see some returns. More and more, cryptocurrency is being accepted as a legitimate investment that is worth a look at when trying to accumulate wealth.
4. Rare or vintage cars
Millions of Americans are involved in collecting cars, but not the kind that the poor cling to like the old cars they drove in their teenage years. An old muscle car or British car you bought in college may still have a niche in your garage and see use as a weekend cruiser, but the wealthy see vintage cars as more than collectibles. They can be used as securities. A vintage Volkswagen Beetle or Lincoln Continental suicide door can be bought for under $20,000, lightly driven for years, and then sold for a (possibly modest) profit. But what about high-end collectibles that cost seven or eight figures? It's not for everyone, but wealthy individuals can use it to diversify their holdings, make money, and maybe even drive occasionally. The top index is up 33.78% for 2019, and more than 500% over the previous 10 years thanks to the growing global wealth chasing a limited number of super collectible cars. The S&P 500 is up 30.5% over the same period. Another classic car index is operated by insurance company Hagerty. At the higher end of the market for classic cars, those that sell for more than a million dollars, you'll find relatively obscure old brands like Hispano-Suiza and Delahaye, as well as names still recognizable today, like Rolls-Royce and Jaguar. Even brands not known for rare, high-end items may become collectible: The beautiful Toyota(TM) 2000GT, built from 1967 to 1970, can fetch more than $1 million at auction. So, if you have some change to spare, why not splurge on an oldie? I'll make you some gold in the future.
3. Public companies (stocks)
Ultra-rich investors may own a controlling stake in one or more large corporations. But, many of them hold a portfolio of only a few securities while others are all about simplicity. They invest in index funds and dividend stocks. They love the passive income from equity securities just as much as they love the passive rental income that real estate provides. They simply do not want to use their time managing investments. Stocks also have low management fees and excellent diversification. Of course, they are also concerned with capital appreciation, but for some, this is less of a concern than current income generation.
2. Private equity and hedge funds
Unless you are a millionaire, you may not participate in a hedge fund or buy into a private equity fund. Public stocks are well known since their shares are traded on stock exchanges. One of its advantages is liquidity. You can easily liquidate the general stock or your stock. On the other hand, private equity funds generally get their investments from large organizations such as universities or pension funds. Investors in private equity funds must be accredited investors with a defined net worth, usually at least $250,000. This amount is already more than any poor person could be lying about. Accredited investors can be individuals and corporations, but are determined by regulations. In other areas, private equity funds do not have to comply with as many regulations as public equity funds. If you are an accredited investor, some super-rich will invest in private equity. Hedge funds are not like private equity. Hedge funds use pooled funds and follow multiple strategies to generate above-average returns for investors. Hedge funds invest in everything that fund managers believe will yield the highest possible returns in the short term.
1. Alternative Investments
As mentioned earlier, alternative investments top the assets that wealthy people spend their money on. It can be profitable investments such as fine art, expensive musical instruments, or rare books. Also, there is the super-rich with investments in intellectual property rights such as the rights to songs or movies. These can be very profitable investments.
As you've discovered, wealthy people have many different investing philosophies, so it's hard to generalize as to where they keep their money. However, all mentioned are legitimate investments for such individuals. Since they have a desire to reduce their risk, many prefer diversified investment portfolios.
Remember that you can combine more than one of these investments to enhance your wealth. Ok guys that's all we have for you today have a nice day and see you the next day.
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