While the typical investor is often advised to “stay the course,” the ultra-wealthy usually have someone whose sole job it is to move their money around, taking advantage of the natural ebb and flow of investment returns.
While they don’t buy and sell investments willy-nilly, they will certainly divest and invest based on economic and geopolitical events.
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Where are the wealthiest people putting their money right now? And should you follow suit? Here’s what you need to know.
Real Estate
Real estate would seem to be an investment that the ultra-wealthy would be fleeing from, not to, given the recent high interest rates. But even with as rates rose, prices are continuing to rise as well, likely because inventory is down.
In The Wealth Report, Knight Frank found that more than one in five “Ultra-High Net Worth Individuals” (UHNWIs) planned to purchase residential real estate this year. Nearly that number is expected to invest in commercial real estate, which is rebounding after a slow 2023.
Real estate has long been a popular choice for wealthy investors, but the last few decades have shown that it can be volatile.
For investors with more modest portfolios, a real estate investment trust (REIT) or a real estate exchange-traded fund (ETF) can provide a pathway to real estate investing.
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Alternative Investments
Alternative investments can include a lot of different things: private equity, venture capital and even collectibles.
These investments are not traded on securities exchanges; rather, they are bought and sold directly, in the case of collectibles like watches, cars, coins, and art, or equity investments in private companies, like venture capital, angel investment and private equity.
Alternative investments provide a hedge against more traditional investments like stocks and bonds, according to alternative investment firm KKR. KKR expects alternative investments to grow to $24 billion by 2028, up from $9 billion in 2018.
Bonds
Bonds are kind of the unsung heroes of investing. They lack the excitement of stocks, the appeal of mutual funds and the intrigue of alternatives. They provide a predictable return on your investment.
But the super wealthy know that predictability, while it may not make you rich fast, also won’t make you poor fast — or at all.
According to the UBS Global Family Office Report 2024, high net worth investors “lifted allocations to developed market fixed income by the largest amount seen in five years.”
The report indicated that this shift “may reflect elevated bond yields as much as active decision-making,” meaning that higher yields on fixed income investments contributed to their larger allocation in the total portfolio.
Cash
When inflation is high and interest rates are low, cash is a poor investment. You lose real purchasing power in this scenario, since interest isn’t keeping up with purchasing power.
As interest rates rise and inflation declines, cash becomes a lot more attractive. And even as both interest rates and inflation begin to moderate, a cash position in your portfolio can serve as a hedge against volatility in the equity markets.
Janus Henderson surveyed 1,000 mass affluent and high net worth investors and found that nearly a third (32%) plan to move from equities (stocks) into cash or bonds over the next year. Higher interest rates and the potential for increased volatility were cited as the driving factors for this shift.
Your investment portfolio may not qualify you as a member of the 1% — at least not yet. But that doesn’t mean you can’t follow their investment strategies and improve your chances of getting there someday.
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This article originally appeared on GOBankingRates.com: The 1% Are Shifting Millions Into These 4 Assets — Should You?
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