When you think about where the ultra-rich put their money, you might think of portfolios with a lot of stocks, maybe some bonds and a dash of luxury assets like art or rare cars. But in reality, stocks are not the most important asset for many high-net-worth individuals (HNWIs). Instead, real estate dominates, making up a significant portion of their wealth.
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Why the rich favor real estate
For the ultra-wealthy, real estate is not just an investment; it is the basis of their portfolio. Real estate is a “real asset” with long-term growth potential that does not fluctuate as wildly as the stock market. This stability makes it especially attractive in uncertain times. According to Knight Frank, ultra-wealthy investors (those with a net worth of $30 million or more) allocate about 32% of their wealth to residential and about 21% to commercial real estate. In total, that is more than half of their assets in real estate.
These investors often own multiple properties in prime locations around the world. These aren’t just trophy items either. Many properties are “passion investments,” providing personal enjoyment and financial appreciation. Imagine a beach villa that values and functions as a luxurious retreat. This dual nature – lifestyle and investing – adds depth that stocks or bonds can’t match.
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Real estate versus other investments
So where does that leave traditional assets like stocks and bonds? While stocks remain significant, they tend to be less part of ultra-wealthy portfolios than real estate. Stocks offer growth, but the wealthy are selective and often prefer large stakes in top companies, private equity or venture capital over risky ventures. On average, stocks account for about 26% of ultra-rich portfolios. For them, shares are a growth tool and not the main ‘wealth builder’.
Bonds have become less attractive due to their low returns in recent years. Bonds typically make up about 10% of ultra-rich portfolios, especially in today’s fluctuating interest rate environment. Instead, wealthy investors are increasingly drawn to alternative investments, such as private equity, venture capital and luxury assets such as art and collectibles. These alternatives help hedge against volatility and inflation in the stock markets.
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The rise of alternative investments
In addition to real estate and shares, private equity and venture capital are receiving increasing attention. Private equity investments, which allow the wealthy to buy private companies or startups before they go public, offer high risk but potentially high returns. A report from Campden Wealth and Titanbay shows that the average ultrahigh net worth (UHNW) investor invests approximately 20% of their total portfolio in private equity, with 21% of that private equity allocation going to venture capital. Other alternatives, such as hedge and commercial real estate funds, add diversification and unique value.
Why real estate remains king
Given the recent economic shifts, real estate has only become more attractive. As inflation rises and stock markets remain volatile, wealthy investors see real estate as a hedge against inflation and as a store of value. With real estate steadily increasing in value, real estate has become a solid foundation in a changing financial landscape.
See also: Can you guess how many people retire with $5,000,000 in savings? – How does this compare to the average?
Do you want to invest like the ultra-rich? Here’s how to get started
If the stability of real estate appeals to you, there are accessible ways to get started:
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Alternative assets: For further diversification, consider private equity funds or alternative assets such as art or collectibles, although these require careful research.
Investing like the ultra-rich doesn’t mean chasing every asset class they own. But understanding why they choose real estate over stocks reveals valuable lessons: Real assets, especially in real estate, can provide stability and steady growth, even in a volatile market.
With thoughtful, strategic decisions you can also build a portfolio with long-term potential. It is also good to consult a financial advisor for personalized investment advice that suits your goals and risk tolerance.
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This article Can you guess which asset the ultra-rich invest in the most? Here’s a tip: It’s Not Stocks originally appeared on Benzinga.com
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