Following how wealthy investors spend and invest their money can provide invaluable information. The reason why so many rich investors stay rich is that their investments lend themselves to big gains in both the long and short term.
While they may have a lot of money, it doesn’t mean you can’t follow the same investment paths the wealthy take. Here are a few of the main ways wealthy investors invest their money.
High-yield savings accounts
While high-yield savings accounts don’t sound like the most exciting thing, along with forex trading, they are one of the most popular ways the wealthy invest their money. Many tend to put as much as 10% of their net worth, in cash, into one of these accounts, which keeps it liquid and allows them to invest in new opportunities whenever they want.
Their money is stored in high-yield savings accounts, which allows them to grow their large savings with interest while ensuring it isn’t tied up in anything and is always available.
Index funds are arguably the biggest part of investing for the wealthy. Instead of investing in individual companies, index funds are made up of all of the biggest companies in the world, such as Apple, Microsoft, Amazon, etc.
This allows you to benefit from the growth of these major corporations while remaining protected if any of them were to go under. Index funds have been shown to produce 7-10% in annual returns, which is fantastic, especially for bigger investments.
Another incredibly popular investment method for the wealthy is rental properties. These range from apartment buildings to warehouses and industrial spaces; rental property has been a staple in the investment world for a very long time.
One of the biggest draws is that you don’t need to have experience in home owning, building, or design to get into rental properties. You can simply own the building and let the tenants do the work for you.
The secondary marketplace is a bit of an unknown investment avenue for the average person. This is where investors can purchase the stock of private companies that haven’t been listed on the stock exchange yet.
No matter what you think about it, cryptocurrency is going to be a big part of our future. Blockchain technology is being implemented everywhere, and cryptos are evolving into something that can be a legitimate form of currency.
Investors know this, too, and are getting in early where they can. Whether it be buying up tens of thousands or even hundreds of thousands of tokens or investing in crypto businesses, they want to get into a strong position as early as possible.
Another common route many investors take is in start-ups. Investing in start-ups can be done in different ways, but two of the most popular would be coming in as part of the board and working with the team and within the company, and the other way would be similar to an angel investor.
An angel investor would invest in a company but will get a minority stake in return. This is often done by people who have the money a company needs to succeed, but also people who don’t necessarily have the knowledge or skills to improve said business.
Alternative energy is another sector that has become incredibly popular amongst investors over the past few years. Whether it be green energy, electric cars, or wind power, there are hundreds of companies looking for new ways to power our world.
Many of these companies are still relatively small, and therefore investors are able to get in very early and become part of a sector that is growing at a rapid pace.
Wealthy investors become that way due to two main factors; they have a very diversified portfolio, and they have multiple revenue streams.
Protects against markets dips
One of the biggest advantages of a diversified portfolio is that you are able to protect yourself against market dips and crashes. You can think of a diversified portfolio as a fruit stall; you will still make money selling other fruit if your apple shipment doesn’t come through or if you can never get grapes again.
If your portfolio isn’t diversified at all, you are relying on a singular investment to always be strong, which simply isn’t the case.
Multiple revenue streams
Another big factor in the success of investors is to have multiple revenue streams. Not only does this bring in more money, but it also allows for more opportunities. If you are heavily into the property, you more than likely don’t have a lot of liquid capital available.
However, if you have property, index fund investments, and crypto, for example, you have both long and short-term investments and multiple ways to get liquid cash to invest in something new.