When it comes to investing, it would appear that the super wealthy have it all figured out. The question is, what are they doing, and how can we mimic it?
There are five key things that the super wealthy invest their money in that you could implement on a smaller scale to boost your investment portfolio.
First and foremost, the super-wealthy invest in their education. Markets are always changing, and that means your awareness should be as well. Tax-Free Savings Accounts (TFSA) were only introduced recently in 2008. The real estate market is continuously changing, and political changes influence markets across the globe. An essential investment you can make as an investor is time and money on continuous education.
All the super-wealthy investors will have a percentage of their investment portfolio in cash — generally around 10%. Cash is crucial as it frees investors up to invest in opportunities that come along on a tight timeline. It also allows investors the freedom and flexibility to play with short-term investments without impacting their long-term investments.
Long-term investments are crucial to any portfolio. Take, for example, the Canadian National Railway stock (CNR). Over the past 20 years, this stock has provided total returns of 2779.66%. It has short-term dips and stressors, but over time, it’s been extremely reliable. The super-wealthy think long term with the majority of their portfolio, and they look for investments that pay off over time. Commitment is key in these areas.
Private Markets are more challenging investment areas for the average investor to get into — but not impossible. However, the ultra-wealthy recognize that there’s greater opportunity for growth in the private market and less competition.
Alternative investments are one of the largest sectors that the super wealthy invest in, providing vast opportunities. Statistics compiled by TIGER 21 suggest that the super wealthy investor allocates a large portion of their portfolio to alternative assets and nearly 30% of that to real estate.
These investments can be anything from commodities and private equity to tangible assets and real estate.
Real Estate Investment
If we’re going to talk about alternative assets, we have to focus on real estate. Numerous investors will pit real estate and stocks against each other, and most will make an argument for real estate over stocks. In a perfect world, you’d diversify your portfolio across both. However, there’s an opportunity for both long-term and short-term gains when investing in real estate. Long-term gains show up as the value of property, and real estate increases over time. Owning land or property is an excellent way to grow long-term wealth. However, with opportunities to act as a financier for real estate projects through vehicles such as MIC-managed mortgage pools, investors can also capitalize on the growth associated with shorter-term projects and mortgages.
If you’re interested in investing in real estate and following the example of the world’s super-wealthy investors, get in touch with Jordan on our team to learn more.