The rich always seem to be playing a different ball game to the rest of us. They always seem to get richer whilst the average person feels poorer as the years go by. One reason the reasons the rich gets richer is due to their thought out spending habits which you can read about here. Another reason they increase their wealth year on year is because of the way they invest. They way the rich invest differentiates them from the rest of us — and keeps them in the black. In this article, we look at where the rich put their money.
1) Closed-end Funds – a long-term investment where money is typically tied up for at least five years. These types of funds are only available to high net worth individuals (normal minimum requirement is £100,000) but produce big returns and high yields.
One area close-end funds love investing in is aircraft leasing. This is where investors buy planes and lease them out to commercial airline companies. Renowned wealth management firm Fleming Family and Partners work with a company called Doric to buy planes using investor money and lease out these planes to Emirates Airlines and Singapore Airlines.
Investors get an average yield of 9% of this type of investment and are able to cash out once they sell the aircraft.
2) Buying Private Businesses – Unlike the majority of us who are only able to buy public companies that trade on the stock exchange, the rich pool their funds together to buy private companies. This pooling of funds is done using a private equity firm where normal investments per individual range from $1 million upwards.
The Rich also love buying startup companies. Although 50% of startups go bust, the returns for those that stay in business can be monumental. An investor in a startup usually maker 20 – 50 times their initial investment.
3) Property – This is one of the ways in which the wealthy can park their cash. Many rich people don’t buy property to flip or to sell, many buy them to hold forever and collect a never ending stream of rental income. (The average investor can buy property through Real Estate Investment Trusts or property crowdfunding websites. Read my reviews here on The house crowd and Property Moose)
4) Collectables – The rich love to invest in collectable items such as art, cars, wines, watches and even musical instruments. These assets are normally bought by an investor due to their own passion but make no mistake, the investors buying the ‘right passion can witness very high returns.
5) Hedge Funds – This is an investment vehicle that pools together funds from investors in order to invest in a wide array of assets. Think of open ended funds or investment trusts but for the rich. Hedge Funds aim to make money for its investors during all market conditions. So they make money when the markets is going up and make money when the market is going down.
One of the most famous names in the hedge fund wall is Paul Tudor Jones. His hedge fund has produced positive returns for the last 28 years! To invest with him, you need at invest a minimum of £100m. Another legendary hedge funder is Ray Dalio. He runs Bridgewater Associates. He came out with the Bridgewater all weather fund to show how you can make money in both up and down markets. Read about the All weather fund here. (http://moneygrower.co.uk/2015/03/asset-classes-for-different-market-conditions-bridgewater-all-weather-strategy/).