5 Investments Only the Rich Can Afford

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​​The most financially successful people often have a diversified portfolio of investments. While some investments can be made with very little capital, other opportunities are more exclusive and reserved for those who have built up a sizeable net worth. In other words, they’re rich.

In this article, we’ll take a look at five different investments that only wealthy individuals can typically afford to make. 

Private Equity

Investing in private equity usually involves anywhere from a few hundred thousand to millions of dollars. This leaves it out of reach for most individuals. When investing in private equity you’re taking a stake in a private company with your own money. 

In addition to having the necessary funds available, you’ll need to be an accredited investor. To qualify, you alone or combined with a spouse will need to have a net worth of at least $1 million and an annual income of at least $200,000 in each of the past two years.

Private equity investment opportunity investments are popular because they provide the opportunity to earn a significantly higher return compared to public companies. The downside to private equity investing is that it can be more illiquid compared to other investment products.

Hedge Funds

Hedge funds are another popular investment for the wealthy. They require investors to be accredited and be able to invest a significant amount of capital.

“Hedge funds gather capital from accredited investors and utilize various investment strategies, often involving derivatives and alternative investments, to produce profits,” says Adam Garcia, financial consultant and CEO of The Stock Dork. “Their objective is to generate positive returns regardless of market conditions.”

You can access hedge funds by reaching out to hedge fund managers directly or through investment platforms that connect accredited investors with hedge fund opportunities.

Commercial Real Estate 

Real estate is another common investment for the rich. Investing in real estate typically starts with personal property and then moves on to tenant-occupied properties. Eventually, it moves into multi-family homes and then commercial real estate.

Not only can real estate provide a source of passive income in the form of rent payments, but with rising real estate prices, you can make a significant return on your investment from appreciation. Plus, real estate can withstand the cyclical nature of the stock market.

As an example, let’s assume an investor purchases a $100 million commercial building. While it’s going to take a significant amount of cash upfront, a large portion of it will be financed. Given the average annual return on real estate investments of 11%, the earnings from this commercial building would be roughly $11 million.

“It’s not just about buying a property and hoping for the best,” says Dennis Shirshikov, head of growth at Awning.com and finance professor at the City University of New York. “Successful real estate investment involves market research, understanding zoning laws, assessing property conditions, managing or hiring property managers, and having a strategy for when to sell.”

Raw Land

Similar to purchasing real estate, raw land is a popular investment because it’s easy to accumulate and it appreciates. But you might be wondering exactly how someone can make money on raw land. 

There are a few different ways to invest in raw land. The first is to simply buy and hold. This is the easiest approach. Over time the land will hopefully appreciate in value and you’ll be able to sell it for a significant gain.

The next way people invest in raw land is by developing it. They purchase the land and then develop it into residential or commercial property. Depending on the size of the land, it could be developed into several different properties.

Art 

It’s no secret that fine art can be expensive. In 2017, the Salvator Mundi sold for a record $450.3 million. The one great thing about investing in fine art, though, is that it holds its value over time better than a lot of other assets. Plus, unlike stocks, art is not going to fluctuate in price based on market conditions.

The downside to owning art as an investment is that it’s extremely illiquid. If you own a piece of art, you’d need to have it appraised and then work with an auction house to find a buyer. 

Even though art has typically only been an attainable investment for the wealthy, investment platforms like Masterworks are starting to bring it more to the general public. With Masterworks, you can purchase shares of art with a minimum investment of $10,000 instead of the millions of dollars that it would take to purchase a piece on your own.

The Bottom Line

Wealthy investors have an array of options when it comes to their investing strategies. From private equity, hedge funds, commercial real estate and more, there’s no shortage of lucrative opportunities for the well-off investor to become even more well-off.

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