2 Investments of the Ultra Rich You Can Use To Build Your Own Wealth

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If you want the same results as someone else, start by modeling their habits and behavior. An easy place to begin seeing the same results as the rich is modeling their investments. 

You don’t need to become an investing expert to do it, either. In fact, you probably already know a thing or two about the top two investments of the ultra-wealthy.

Every year, real estate consultancy Knight Frank surveys investment advisors, family offices, and private bankers to compile a report on how the wealthy invest. They found that ultra-high net worth individuals (UHNWIs), or those with net worths over $30 million, invest in these two asset classes more than any other.

Real Estate

As someone who’s spent his entire career in real estate and finance, it doesn’t surprise me in the least that the ultra-rich invest more in real estate than any other asset type. 

Still, real estate comes in many flavors. The report breaks down how the uber-wealthy owns real estate as follows.

Primary & Second Homes

A full 32% of the average UHNWI’s net worth comes from their primary residence and second homes. 

Emphasis on the plural — the average wealthy person owns 3.7 homes, according to the Knight Frank study. 

That makes directly owned residential properties the greatest proportion of their net worth. Which, incidentally, makes them just like the average middle-class American. 

Commercial Real Estate

Where the wealthy differ from the middle class is their expansion into commercial real estate. 

Directly owned commercial properties comprise 14% of the average UHNWI portfolio. Commercial property funds make up another 5%, and commercial real estate investment trusts (REITs) make up another 3%. Private equity makes up 6% of the average wealthy investor’s portfolio, sometimes commercial real estate (and sometimes just means ownership in private companies). 

In short, another combined 22-28% of the average UHNWI’s portfolio lies in commercial property.

As a final thought, you don’t have to be rich to invest in commercial real estate. Anyone with a brokerage account can buy shares in publicly traded REITs. Many real estate crowdfunding platforms also allow non-accredited investors to dip their toe in with $10 – $100 as well. Suppose you invest through a real estate investment club. In that case, you can even invest relatively small amounts in private equity real estate syndications, which are long considered the private playground of the rich. 

Equities

What’s the second asset of choice for the ultra-wealthy? Equities — by which investors mostly mean stocks — makeup 18% of the average UHNWI portfolio.

You could go out and become a stock-picking expert, of course. Or you could just invest in passive index funds that mirror major stock indexes and call it a day.

In fact, you don’t even have to pick the index funds. You can open an account with a robo-advisor to do it for you and in some cases, it’s free. For example, I use Charles Schwab’s free robo-advisor, and it simply pulls money from my checking account to invest every week. 

Robo-advisors can not only manage a diverse stock portfolio for you, but they can also rebalance your account and perform tax loss harvesting. And with the explosion of AI, I expect these automated advisory services to get even smarter in the coming years.

Final Thoughts

Why do the rich love real estate and stocks so much? 

Simple: because they have inherent, measurable value. 

Residences have implicit value as shelter. Both companies and investment properties generate revenue. You can assess any given asset’s value based on similar assets, and based on the income they can produce. 

In other words, the rich aren’t gambling when they invest. They invest in assets with predictable or tangible value. 

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