As we enter the new year, unsurprisingly what's on a lot of people's minds is a topic that consumed the latter half of 2021: soaring inflation.
For the ultra-wealthy, rising inflation is in fact playing a big part in how they're choosing to invest going into the new year.
"As all investors should be, the ultra-wealthy are concerned about inflation and looking to preserve assets in 2022," says Michael Sonnenfeldt, chairman and founder of TIGER 21, a peer-to-peer learning network for investors and entrepreneurs with $10 million to $1 billion of personal net worth.
Though the everyday investor certainly doesn't have millions to their name, there may be ways to copy how the wealthy allocate their money, especially amid ongoing inflation fears that impact us all. Here's how the ultra-wealthy members of TIGER 21 are investing going into 2022.
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1) Building inflation-resistant portfolios
TIGER 21 members are convinced that inflationary pressures will be permanent, not transitory. In fact, 65% of members expect inflation to accelerate in the next year.
They are therefore allocating money to some of their favorite investments to protect against inflation, such as:
- Real estate, like industrial properties and apartment buildings
- Public equities, or stock, in platform companies with pricing power (platform companies are those like Amazon, Apple and Airbnb), consumer staples and streaming services
- Cryptocurrencies (more on this in No. 2 below)
When you think of real estate as an example of an investment to hedge against inflation, this isn't just an asset reserved for the rich. Beyond home ownership, real estate investments can be made through REITs (also known as Real Estate Investment Trusts). A REIT is a company that invests in different kinds of income-producing real estate (shopping centers, condominiums, housing developments, hospitals, parking garages, etc). You can buy shares of the REIT in order to get exposure to its real estate investments and have that real estate be part of your investment portfolio without actually managing property yourself.
You can invest in publicly traded REITs through any brokerage account, likeFidelity,TD Ameritrade and Robinhood, while companies likeFundrise,YieldstreetandElevate Moneyallow you to buy shares in non-publicly traded REITs on your own through their platforms.
2) Doubling their crypto investments
As an alternative to investing in gold to combat inflation, TIGER members have doubled their investment in cryptocurrencies.
TIGER 21 members are putting their money specifically in ethereum (34%), bitcoin (33%), a crypto fund (23%), other coins (15%) and dogecoin (2%).
These wealthy investors certainly aren't wrong. Bitcoin is often described as "digital gold" and theoretically should protect against inflation because of limited supply, but it's not yet known if it will be a good inflation hedge over the long term.
Of course, everyday investors are also able to invest in crypto thanks to finance apps that make it easy. Cash App, a peer-to-peer payment service owned by Square Inc., allows users to buy bitcoin only.PayPalallows users to purchase four different cryptocurrencies: bitcoin, ethereum, bitcoin cash and litecoin. Users holding crypto on PayPal can then use it to checkout on the app as well.
Robinhood, themobile app for stock investing, supports seven cryptocurrencies for purchase by users, including the popular dogecoin meme cryptocurrency. And personal finance provider,SoFi, allows for crypto purchases of 21 different coins and crypto tokens through its app. If you want more control over your crypto and to own it directly, Coinbase offers a platform to buy, sell, swap, store and send over 50 types of cryptocurrency.
3) Increasing investments in alternative energy
Electric vehicle stocks remain hot investments still, and the ultra-wealthy are shelling out more cash into companies like Tesla, Rivian and Lucid.
Tesla stock isn't cheap, but you can still get exposure to the EV market by putting your money in ETFs that invest in a variety of companies tied to EVs, such as Global X Autonomous & Electric Vehicles ETF (NASDAQ:DRIV) or iShares Self-Driving EV and Tech ETF(NYSEMKT:IDRV). This is a broader investing approach, and less risky, than buying individual stocks.
Bottom line
It's interesting to see how the ultra-wealthy are investing going into a new year with rising inflation top of mind. Because this is a concern for every investor, it's helpful to take notes on what they are doing to hedge against inflation.
The lesson here is you don't have to be rolling in extra millions to protect your money in the market.
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FAQs
1) Building inflation-resistant portfolios
Where the ultra rich are putting their money? ›
Real estate. As a result, centimillionaire portfolios often feature “very strong, stable pieces of real estate,” Buscemi said. These wealthy individuals gravitate toward “trophy asset” Class A properties, or investment-grade assets that typically were built within the last 15 years. Monaco Harbor on the French Riviera.
How do ultra high net worth invest? ›
Investing in private equity is a great choice for HNWIs. Private equity firms own stakes in companies that aren't publicly traded. They also buy troubled public companies, take them private and restructure them.
What do the elites invest in? ›
Investing Only in Intangible Assets
Ultra-wealthy individuals invest in such assets as private and commercial real estate, land, gold, and even artwork. Real estate continues to be a popular asset class in their portfolios to balance out the volatility of stocks.
How do the ultra rich make their money? ›
Many self-made millionaires have money coming in from several places, including their salaries, dividends from investments, income from rental properties and investments they have made in other business enterprises, to name a few examples. If one income stream slows down, there's another that can take its place.
Where do millionaires keep their money if banks only insure $250 K? ›
Millionaires can insure their money by depositing funds in FDIC-insured accounts, NCUA-insured accounts, through IntraFi Network Deposits, or through cash management accounts. They may also allocate some of their cash to low-risk investments, such as Treasury securities or government bonds.
What bank do most millionaires use? ›
The Most Popular Banks for Millionaires
- JP Morgan Private Bank. “J.P. Morgan Private Bank is known for its investment services, which makes them a great option for those with millionaire status,” Kullberg said. ...
- Bank of America Private Bank. ...
- Citi Private Bank. ...
- Chase Private Client.
Top 2% wealth: The top 2% of Americans have a net worth of about $2.472 million, aligning closely with the surveyed perception of wealth. Top 5% wealth: The next tier, the top 5%, has a net worth of around $1.03 million. Top 10% wealth: The top 10% of the population has a net worth of approximately $854,900.
What net worth is considered super rich? ›
While there's no legal standard when it comes to defining who is an ultra-high-net-worth individual (UHNWI), they're often defined as those who have $30 million or more in assets. These funds must be in investable assets, which is an important distinction to make.
What salary is considered rich for a single person? ›
Based on that figure, an annual income of $500,000 or more would make you rich. The Economic Policy Institute uses a different baseline to determine who constitutes the top 1% and the top 5%. For 2021, you're in the top 1% if you earn $819,324 or more each year. The top 5% of income earners make $335,891 per year.
Millionaires Don't Keep Much in Their Traditional Savings Accounts. “My millionaire clients keep very little of their net worth in a traditional savings account. $10,000 or less,” said Herman (Tommy) Thompson, Jr., CFP, ChSNC, ChFC, a certified financial planner with Innovative Financial Group.
How many $100 millionaires are there in the US? ›
5.3 million millionaires with a net worth of at least $1 million. 9,630 centi-millionaires with a net worth of at least $100 million. 770 billionaires with a net worth of at least $1 billion.
How much money is considered elite? ›
How much you need to earn to be in the top 1% is wildly different for each state
| State | Top 1% income threshold (2018 data adjusted to 2021 dollars) | Top 5% income threshold (2018 data adjusted to 2021 dollars) |
|---|
| California | $745,314 | $291,277 |
| Washington | $685,128 | $283,574 |
| Colorado | $632,277 | $264,313 |
| Illinois | $627,329 | $250,266 |
46 more rowsJan 26, 2022
Introduction. Real estate investment has long been a cornerstone of financial success, with approximately 90% of millionaires attributing their wealth in part to real estate holdings.
Do millionaires use credit cards? ›
While millionaires are less likely to have a cash back card than the average American, they're more likely to have every other major type of credit card, including travel rewards cards, balance transfer cards, gas and grocery cards, and sign-up bonus cards.
How do billionaires avoid taxes? ›
Billionaires (usually) don't sell valuable stock. So how do they afford the daily expenses of life, whether it's a new pleasure boat or a social media company? They borrow against their stock. This revolving door of credit allows them to buy what they want without incurring a capital gains tax.
Where do most billionaires invest their money? ›
they allocate their assets in a wide variety of things, such as:
- properties (commercial / residential)
- business assets.
- off-shore holdings.
- stocks, bonds, mutual funds.
- commodities such as gold.
- hard assets.
- soft assets.
The top five destinations for high-net-worth individual migration this year include Australia, the United Arab Emirates, Singapore, the U.S. and Switzerland, according to the report, which defines high-net-worth individuals as those with US$1 million or more of investable wealth.
Where does Elon Musk keep his money? ›
What makes up Musk's net worth. Musk lacks significant tranches of cash; his money is largely tied up in ownership stakes of his companies. To buy Twitter in 2022, he leveraged his large share in Tesla and solicited investors, rather than relying on liquid sums.
