5 Passive Income Streams Loved by the Super Rich
Written by
Laura Beck
Edited by
Laura Bogart
Commitment to Our Readers
GOBankingRates' editorial team is committed to bringing you unbiased reviews and information. We use data-driven methodologies to evaluate financial products and services - our reviews and ratings are not influenced by advertisers. You can read more about our editorial guidelines and our products and services review methodology.
20 Years
Helping You Live Richer
Reviewed
by Experts
Trusted by
Millions of Readers
The ultra-wealthy play by different rules when it comes to passive income. They have access to different levels of wealth-building opportunities that we average folks can only dream about.
While most of us invest bits of our paychecks into basic stocks and retirement accounts, the super-rich stakes their claims in much more lucrative opportunities, using their wealth to generate more wealth with little to no effort.
Let’s take a closer look at some go-to passive income streams for the super-rich.
Real Estate Investments
Real estate remains an evergreen passive income channel, offering investors stable cash flow, tax advantages, portfolio diversification and growth potential.
“Investing in real estate, whether through direct property purchases or real estate investment trusts (REITs), is common among the ultra-wealthy for a few reasons,” said Forrest McCall, founder of Passive Income Freak. “Real estate can generate income through rent and potentially appreciate over time. It’s attractive due to its potential for steady cash flow and tax benefits that are even more beneficial for those with great wealth.”
Sebastian Jania, director of Ontario Property Buyers, explained, “The ultra-wealthy do not buy single-family homes unless they are buying them en masse; predominantly they are focused on owning large apartment buildings and having companies which manage them for them so they are not actively involved in that income.”
To extract maximum value, the affluent target high-yield commercial real estate like hotels, apartments, office spaces and healthcare facilities. Top-tier properties in prime locations deliver higher rental income and lower vacancy rates.
Business Investing
Owning a business provides the wealthy with a steady stream of lucrative income with little time investment.
“Owning a business or being a silent partner in a business can provide passive income for wealthy people with the potential for massive returns,” McCall said. “This allows you to earn profits without being directly involved in the day-to-day operations.”
“The ultra-wealthy are typically not the ones in the daily meetings, talking to their employees, they are the ones who own the company but are not running the company as a CEO; they get to benefit from the passive income that they generate from the company while others run it,” Jania added.
The ultra-wealthy hold a diverse array of business assets — from restaurants and retail chains to technology firms and industrial manufacturers.
Dividend Stocks and ETFs
Blue chip dividend stocks and exchange-traded funds (ETFs) are another low-effort income generator. Over time, investors compound their returns as reinvested dividends purchase new shares.
“By investing in a portfolio of dividend-yielding stocks, investors receive regular payouts without selling their shares,” said Dominic James Murray, CEO and IFA at Cameron James. “This method offers a balance between income generation and capital appreciation. ETFs complement this approach by providing diversification and reducing the risk associated with individual stocks.”
Dividend stocks may not be as lucrative or exciting as private equity, but they are accessible and generally a low-risk investment offering superior tax treatment. Wealthy investors build highly diversified portfolios across sectors and geographies to maximize yields while mitigating volatility risk.
They focus on stocks that consistently raise dividends over decades and thrive despite challenging economic environments.
Private Equity and Venture Capital
For those with an appetite for calculated risk, investments in high-growth private companies and startups deliver significant returns.
“Private equity and venture capital investments offer the ultra-wealthy an opportunity to be part of potentially high-growth ventures,” Murray said. “These investments are typically made in private companies or startups and can yield significant returns if these ventures succeed.”
The appeal lies in securing a stake in an emerging industry disrupter before hitting the public markets or getting acquired. Top-tier VC funds and direct ownership deals are typically reserved for accredited investors.
That said, the risks are equally amplified, from high failure rates to illiquidity and loss of capital. Without ongoing involvement and support, startups can flounder.
“These investments carry higher risks, including the potential for total loss of capital,” Murray said. “They require a thorough understanding of the business landscape and a strategic investment approach.”
The ultra-wealthy mitigate risks by investing at multiple stages across a diverse portfolio of startups. Loss-making companies are balanced out by sharp gains from runaway successes. Financial advisors help clients assess the best private equity and venture capital investment opportunities.
Alternative Assets
Art, collectibles, artifacts, wine, musical instruments or even whiskey represent an esoteric array of alternative assets favored by the ultra-wealthy.
Murray explained that alternative investments like these “not only diversify investment portfolios but also offer personal enjoyment and the potential for appreciation over time.”
He cautioned, however, that, “Investing in alternative assets requires specialized knowledge and understanding of the associated risks. These investments can be complex and often lack the transparency of traditional investments.”
More From GOBankingRates
