Here's How The Rich Invest Their Money
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Published 2024-07-08
I am a Chartered Wealth Manager and Partner in a financial planning practice based in the UK. If you would like to find out more about working with us, please follow this link: go.novawm.com/getintouch
References
I would highly recommend watching the Rational Reminder Podcast episode on Alternatives.
• RR #219 - Expected Returns for Altern...
The Performance of Hedge Fund Performance Fees
papers.ssrn.com/sol3/papers.cfm?abstract_id=363072…
Has Persistence Persisted in Private Equity? Evidence from Buyout and Venture Capital Funds
bfi.uchicago.edu/wp-content/uploads/2020/11/BFI_WP…
How to Use Alternatives in Your Portfolio
www.morningstar.com/alternative-investments/how-us…
RISK WARNINGS AND DISCLAIMERS
Capital at risk. Past performance is used as a guide only. It is no guarantee of future returns. Different funds and asset classes carry varying levels of risk depending on the geographical region and industry sector. You should make yourself aware of these specific risks prior to investing. The property market can be illiquid; consequently, there can be times when investors will be unable to sell their holdings. Property valuations are subjective and a matter of judgement. VCTs, EIS and SEIS should be regarded as higher risk investments. They are only suitable for UK resident taxpayers who can tolerate higher risk and have a medium to long term time horizon. Owing to the nature of their underlying assets, these investments are highly illiquid. Investors should be aware that they may have difficulty, or be unable to realise their shares at levels close to or that reflect the value of the underlying assets. Prevailing tax rates and reliefs are dependent on your individual circumstances and are subject to change. We do not provide tax advice. Any examples used in the video are for illustrative purposes only and you may get less back than the figures shown. This video does not constitute personal advice. We do not take any responsibility for third party websites and content we may link to from this video. Issued on behalf of Nova. Nova is a trading name of Nova Wealth Limited, which is authorised and regulated by the Financial Conduct Authority (FRN: 778951) and is a limited company registered in England & Wales (10739796).
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00:00 The question?
01:25 What are they investing in?
03:30 The Power of Diversification
04:49 Commercial Property
06:17 Property Funds
07:07 Commodities
07:36 Private Equity
10:57 Private Equity Funds
14:00 Hedge Funds
15:32 Conclusion
All Comments (21)
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WARNING! Please please be wary of bots that are trying to impersonate me in the comments. Lately, they have been offering "Coaching courses" and trying to get you onto WhatsApp. This is not me it's a scam. I will never try to contact you; you can only get in touch with me via the link in the description of the videos. My audience skews heavily to older people who are more likely to fall victim to scams. So if you see any comments from bots, please report them. It's really helps to protect others in the community. Thanks in advance!
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A good rule of thumb is that if your portfolio is too boring to discuss in social situations, you've done it right.
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I am a retired institutional fund manager (36 years in the industry). I’ve seen it all from the inside and agree with 100% of what this gentleman is saying. The money that wealthy people put into alternatives is their “fun money” the equivalent of an ordinary person buying a few lottery tickets. They kid themselves that itis diversifcation but it’s just thinly disguised greed and generally what they gain in return they give away in fees…. And that’s the lucky ones. So good to see such sound advice being given.
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Just one point that needs emphasised. The JP Morgan survey (or similar) of HNWI is a self-selecting group. The richest cohort of individuals (excepting inherited wealth) are typically company owners, rather than those taking income from employment. As such, the stats are always going to show a substantial % of HNWI having their wealth in private stocks, since they are company owners. That’s less of a result of a ‘wealth strategy’ of the HNWI - if you excluded owners of their own companies (as opposed to people with the wealth able to buy into private equity), the mean average holdings would no doubt be rather different.
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If you don’t understand it don’t invest in it…
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Thx James for saying it outright : "People shouldn't consider their homes an investment" thank you very much.
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It's worth remembering that "The Rich" also invested in Theranos.
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Great video, James! However there is one asset I want your opinion on: farmland. Unlike residential property (over-exposed for most) and commerical property (business cyclic, rich people's fun money, just a sector fund in the case of REITs) it actually does offer a distinct asset class. However, it's extremely hard to get into unless you're a farmer. And as far as I've seen, there's no direct property fund investing in farmland in the UK.
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There are a handful of hedge funds I absolutely would love to invest in. The only problem is I don’t meet the $10 million minimum investment requirement 😂
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That last analogy about Federer is a really great point.
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Always top notch advice James The only finance influencer people should listen to
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I agree with the simple funds,but ditch the bonds and add a sattelite fund such as a nasdaq tracker.
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Great content! Very interesting from the start. These are difficult times and I appreciate the sensitivity with which you discuss global finance. Trading and investing are great ways to build wealth and I have no doubt about the profitability of the cryptocurrency market. Earning a weekly income of 7,600 euros even during a recession and high inflation is impressive. Harry is doing a fantastic job and is the perfect person to lead these investment activities.
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Larry Fink says BlackRock’s deal to acquire Preqin could lead to indexing private markets
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Given the high fees of these alternative investments mean most rich investors would have done better just with huge index fund investments, I'd be interested in a video on why they use alternatives given the downsides. Is it really smart for them or do they just get suckered into it by sales? You discuss this a bit at the end but is there more (or more rigorous evidence you could discuss)?
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The mantra KISS is usually the best rule to follow. So for me that is low cost tracker funds in an isa & pension.
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sound advice James - and I couldn't agree more
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Forgot to mention private credit
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My wife and I are 75. We have always invested 100% in stocks. The broad market. We set a goal for the annualized return. The broad market gave us that and more. There was and is no need for us to look for other investments.
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No, do NOT copy them, they invest like this because they are already rich. If you want to get rich do NOT copy them.
