By virtually all measures, we are in the middle of an unprecedented investment boom. A glut in household savings and a white-hot stock market has propelled personal investments to near-all-time-highs, as more and more people seek to make their money work for them. It is for this reason that new markets are appearing at a record pace, with NFTs and crypto taking the lead in the popular asset race.
Of course, while more people are investing than ever before, the incredibly wealthy among us have been investing forever. Many of the investment trends right now mirror the tried-and-tested investing techniques of the ultra-rich, while others are the types of investments that the rich would not touch with a barge pole. If you want to know how the upper-crust invests, read on to find out.
Any money management guide will tell you that it is important to diversify your portfolio in order to widen the net and protect against losses. However, there are limits to this approach. Many of the 1% tend to diversify within strict limits. This is because stretching your portfolio too thin across too many assets runs the risk of eliminating any possibility of supernormal gains. A little bit of risk is necessary for any substantial investment growth, so avoid over-diversification.
2. Hedge Your Bets
Betting on both sides means that you can double your chances of a pay-off while also insuring your losses. The best way to do this is by both investing in and shorting certain assets. Naturally, this can be difficult to do with stocks directly, which is why many investors short assets via CFDs, or contracts for difference. As this expert investor’s guide to CFDs explains, you can use CFDs to take a short position against an asset that you already own, thereby hedging your bets. A frequently-used strategy with the super-rich as well as those of us with average incomes, it really bridges the gap between both economic backgrounds.
Given the absolutely manic behavior of the stock market over the past year or so, there has been no shortage of market trends and get-rich-quick schemes that everyone seems to have jumped on. You might have noticed already that one group that avoids jumping on the latest market trend is the super-rich. Rather, they tend to stick to solid investment principles and always look at the long-term, focusing on wealth creation rather than overnight riches.
4. Have Fun with It
Wealthy people might seem like a prudent bunch, but they are also very good at ensuring that they have fun with their investments. If they played it 100% safe, they would not stand a chance of making a huge amount of money. That’s why the monied tend to have two sets of capital; risk capital and long-term investment capital. Their risk capital is, essentially, money they can afford to lose. They will use this to take riskier financial positions and speculate on potential big-money bets. If they are lucky, they make an overnight fortune. If they are not, it’s no big deal. By following these tried-and-tested investment strategies of the ultra-rich, you can build a sustainable a