Investing Strategies of the Ultra-Wealthy and How You Can Do It Too
Updated: Aug 31, 2019
Lifestyles of the Rich and Famous was a television show (1985-1995), hosted by Robin Leach. The show captured what it was like to live with what most people would consider an “unimaginable” amount of wealth. Viewers saw how celebrities like Princess Diana and entrepreneurs like Robert Petersen, creator of the “Hot Rod” brand, created and used their wealth.
Money will play an important role in your future. Whether you want to accumulate enough money to buy a mansion and Lamborghini or just want to have a comfortable retirement, the investments you make now will determine the fate of those dreams.
Even if you don’t want to take over the world or become a celebrity, accumulating sustainable wealth will take the stress and pressure out of your world, and help you enjoy your life, family, and friends.
Shows about the rich and famous are just as popular today with countless reality and fiction-based shows available to watch online and nightly on television. Millions of Americans daydream while watching these shows, picturing what they would do with this amount of money. Do you?
There’s one thing missing from the majority of these shows and stories about the wealthy – the difference in access to opportunities that exist between the wealthy and the rest of society.
Wealth comes with access to opportunities
On an everyday basis, you don’t get access to the same opportunities in life as the ultra-wealthy.
For example, imagine spending a night out on the town with your friends. Your wife suggests that you all go to a new club that’s quickly becoming known as the best place to get a drink in town. You arrive at 10 and see a long line of people stretched down the street.
Your group of friends goes to the back of the line. While you’re waiting, you see several people go right to the front of the door, skipping the hour-long wait to get into the club. This is because wealth comes with access to opportunities. Just as a local celebrity may get special treatment and moved to the front of the line to get into a club, the ultra-wealthy get exclusive opportunities to make investments that others don’t have access to.
Investment opportunities often only available to the ultra-wealthy include:
Commercial real estate
Commercial real estate is a popular investment option for the wealthy. They can invest several million (or more) in a large commercial property and accomplish several goals at one-time:
Improve the property and increase its value
Benefit from rising property value
Create consistent streams of passive income
The streams of passive income allow the investor to receive regular (monthly or quarterly) payments from the revenue earned from tenants or renters. These properties can include mobile home parks, large apartment complexes, condominiums, self-storage units, and more.
Explained by Forbes Contributor and Bigger Pockets podcast host David Greene, real estate builds wealth more consistently than other asset classes. Benefits outlined by Green include cash flow. “Wise investors don’t bet on appreciation,” says Greene. “They purchase properties on a sound judgement that the property will generate more income than it costs to own.” Greene goes on to explain that investors who want to “cash flow positively” are not as concerned what the short-term market does since their investment is protected by the regular income they are earning from the property.
Hedge funds involve a pool of money from wealthy, accredited investors or institutions to invest in a portfolio of assets. Hedge funds are often aggressive, seeking to generate high returns. They also carry a lot of risk. These funds are less regulated by the SEC, require accredited investors as mentioned above, and require investors to make a significant minimum investment, in most cases, $1M.
Private companies (business interests)
For those with over $1B in assets, business interests make up over 50% of their assets. This includes businesses they own and businesses they invest in, either as an angel investor or venture capitalist.
Becoming a venture capitalist or angel investor allows the wealthy to get ownership in a business from their earliest stages, which is often reserved for investment firms and individuals with a track record of investing in successful startups. Finding the next Uber, Airbnb, or Facebook can create generational wealth. This type of investing is risky due to the fact that most early-stage businesses fail.
How the ultra-wealthy acquired their wealth
So how did the wealthy get that way? Is it out of reach for you?
The ultra-wealthy, also known as an “Ultra-High Net-Worth Individual” (UHNWI), are not all “trust fund babies.” They are mostly self-made. According to Statista, around 67.4% of UHNWI’s created their own wealth, 21.7% have used an inheritance and also consider themselves to be self-made, and 10.9% are ultra-wealthy because of an inheritance. This means that it’s entirely possible to build that amount of wealth in your lifetime.
From inventors to investors to entrepreneurs to CEO’s, there are many paths to becoming a self-made millionaire (or billionaire). What they have in common is that they invest their earnings to build wealth.
The ultra-wealthy balance their risk through diversification and steady, passive income streams. Diversification allows them to spread out their investments, which decreases their exposure to risk. Passive income streams boost their amount of available capital and give them a constant and quick return their investments.
How to invest like the wealthy using real estate syndication
Commercial real estate syndications, available through Madison Investing, bring once-exclusive commercial real estate investments to investors who are not (yet) part of the ultra-wealthy. A syndication is a group of investors that pool their money together to buy investment properties.
The investment properties that are purchased and managed in a syndication are commercial properties, like self-storage facilities and apartment complexes. These properties could not be purchased by most individual investors, but by pooling their money, investors can gain access to own a percentage of these valuable properties.
Like hedge funds, a real estate syndication is a managed investment that allows investors to pool their money together. Unlike a hedge fund, investors in a real estate syndication have lower initial investment requirements and receive regular passive income.
Do you want to invest like the ultra-wealthy? Learn about the requirements for joining a commercial real estate syndication here.
Don’t stop just yet!
After learning about the requirements for joining a real estate syndication, join our mailing list here to receive regular updates and notifications when investment opportunities are available.
After joining our mailing list, keep learning to increase your chances of moving your investment portfolio closer to your goals. Read more from Madison Investing by clicking on the articles below:
The Cost of Inaction to Your Investment Portfolio
No Offer of Securities—Disclosure of Interests
Under no circumstances should any material at this site be used or considered as an offer to sell or a solicitation of any offer to buy an interest in any investment. Any such offer or solicitation will be made only by means of the Confidential Private Offering Memorandum relating to the particular investment. Access to information about the investments are limited to investors who either qualify as accredited investors within the meaning of the Securities Act of 1933, as amended, or those investors who generally are sophisticated in financial matters, such that they are capable of evaluating the merits and risks of prospective investments.
Disclaimer: This article is intended for educational purposes only and does not constitute investment advice. You should always contact a registered financial professional before acting on this, or any advice. I am not a tax advisor or financial planner. This article represents my opinions.