When you think of where the ultra-wealthy put their money, you might picture portfolios heavy in stocks, maybe some bonds and a splash of luxury assets like art or rare cars. But in reality, the top asset for many high-net-worth individuals (HNWIs) isn’t stocks. Instead, real estate dominates, making up a substantial chunk of their wealth.
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Why the Wealthy Favor Real Estate
For the ultra-wealthy, real estate isn’t just another investment; it’s the foundation of their portfolio. Real estate is a “real asset” with long-term growth potential that doesn’t fluctuate as wildly as the stock market. This stability makes it especially attractive in uncertain times. According to Knight Frank, ultra-wealthy investors (those with $30 million or more in net worth) allocate about 32% of their wealth to residential properties and around 21% to commercial real estate. Altogether, that’s more than half of their assets in real estate.
These investors often own multiple properties in prime locations around the world. These aren’t just trophy assets, either. Many properties are “investments of passion,” offering personal enjoyment and financial appreciation. Imagine a beach villa that appreciates and doubles as a luxurious retreat. This dual-purpose nature – lifestyle and investment – adds depth that stocks or bonds can’t match.
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Real Estate vs. Other Investments
So, where does this leave traditional assets like stocks and bonds? While stocks remain significant, they tend to make up less of ultra-wealthy portfolios than real estate. Stocks offer growth, but the wealthy are selective, often favoring large stakes in top companies, private equity or venture capital over risky ventures. On average, stocks account for about 26% of ultra-wealthy portfolios. For them, stocks are a growth tool, not the primary “wealth builder.”
Bonds, meanwhile, have become less appealing due to their low returns in recent years. Bonds typically comprise about 10% of ultra-wealthy portfolios, especially in today’s fluctuating interest rate environment. Instead, high-net-worth investors are increasingly drawn to alternative investments, like private equity, venture capital and luxury assets like art and collectibles. These alternatives help hedge against stock market volatility and inflation.
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The Rise of Alternative Investments
Beyond real estate and stocks, private equity and venture capital are getting more attention. Private equity investments, which allow the wealthy to buy into private companies or startups before they go public, offer high-risk but potentially high returns. A Campden Wealth and Titanbay report reveals that the average ultrahigh net worth (UHNW) investor allocates about 20% of their overall portfolio to private equity, with 21% of that private equity allocation going to venture capital. Other alternatives, like hedge and commercial property funds, add diversification and unique value.
Why Real Estate Remains King
Given recent economic shifts, real estate has only grown more appealing. As inflation rises and stock markets stay volatile, wealthy investors see real estate as a hedge against inflation and a store of value. With properties that appreciate steadily, real estate has become a solid bedrock in a shifting financial landscape.
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Want to Invest Like the Ultra-Wealthy? Here’s How to Start
If real estate’s stability appeals to you, there are accessible ways to get started:
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Alternative Assets: For further diversification, consider private equity funds or alternative assets like art or collectibles, though these require careful research.
Investing like the ultra-wealthy doesn’t mean chasing every asset class they own. But understanding why they favor real estate over stocks highlights valuable lessons: real assets, particularly in real estate, can provide stability and steady growth even in a volatile market.
With thoughtful, strategic decisions, you, too, can build a portfolio with long-term potential. It’s also good to consult a financial advisor for personalized investment advice that aligns with your goals and risk tolerance.
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This article Can You Guess What Asset the Ultra-Wealthy Invest In Most? Here’s A Hint: It’s Not Stocks originally appeared on Benzinga.com
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Source: finance.yahoo.com