6 Unique Investments Mostly (but Not Exclusively) for the Very Wealthy
Free Book Preview Money-Smart Solopreneur
The top 1 percent of the world’s wealthiest are an accomplished and unique bunch. These men and women, who in the US have an individual net worth of more than $10 million, tend to have accrued their initial wealth from the financial or tech sectors.
However, these individuals rarely gain their entire net worth solely from income. More often than not, the wealthiest men and women in the world achieved that status by wisely investing their money and multiplying their wealth several times over.
Here are six unique ways the rich invest their money.
1. Film and media
Film and media are high-risk investments. Bad films can lose millions, while “Hollywood accounting” is legendary for minimizing the profits of investors even when the film is successful. However, when done correctly, this investment strategy utilized by the rich can pay off very nicely.
Films are incredibly capital intensive. Studios and networks often welcome investment from those who have liquid assets. Megan Ellison, the founder of Annapurna Productions, the company behind films like Zero Dark Thirty and Phantom Thread, followed her passion with the help of a capital investment by her father, Larry Ellison, the founder of Oracle. However, her keen eye and artistic talent allowed her to gross hundreds of millions of dollars at the box office.
While investing millions of dollars in Hollywood productions may not be an option for all of us, keeping an eye out for artistic friends or independent artists we enjoy who are seeking support for a new project could be a risk worth taking. Who knows -- you might even end up with an Oscar!
2. Luxury real estate
The Manhattan real estate boom is here. While much of the broader growth is supported by private firms and commercial real estate companies, a surprising amount of investment is being supported by international high-net-worth individuals who are interested in buying an already expensive piece of real estate.
Creating a passive income stream without the need to remodel or develop an already successful piece of property allows the ultra-wealthy access to one of the most beautiful and expensive real estate markets in the world with little risk.
In 2015, $3 trillion of global wealth was invested in owner-occupied high-value homes. In just one example, Chen Guoqing, the founder of China’s Hainan Airlines, recently invested $47 million in a condo on Central Park. By investing in already high-profile real estate, the super rich are able to create a unique investment opportunity for themselves, while also enjoying the view.
3. They “invest” in avoiding taxes.
Taxes are a pain for everybody, but taxes can add up to millions of dollars for the top 1 percent. As they are increasingly in the public eye, the ultra-wealthy are finding new ways to strategically minimize and reduce their taxes. They use a variety of methods, including deductions and extraterritoriality, but every method starts with investment in a trained and trustworthy financial planner and accountant.
Private wealth management is an important part of handling any sizable fortune, and the industry has a market cap of billions of dollars as a result. However, these men and women provide an invaluable service to their clients by maximizing their investment opportunities and reducing risk.
Everyone can replicate the ultra-wealthy in this aspect. Investing in professional financial management, while a significant expense, could save a huge percentage of one’s net worth. This “investment” in professional financial management pays for itself. Everyone who reaches that point is busy making money, so why not let a professional handle the details?
4. Angel investments
For the wealthy, it is not uncommon to have equity in privately owned businesses or ventures, either as an investor or as a founder. This type of investment, often called “angel investing,” attracts high-value investors due to the potential for higher-than-average returns.
Private equity ownership is usually only offered to the ultra-rich, since the bare minimum for investment begins at about $250,000 on average. Additionally, the high degree of risk that comes with private equity investments usually excludes low-net-worth individuals who cannot afford to participate.
For the wealthy, the increased level of risk that comes with private equity is no problem and can often lead to success.
5. Developing markets
According to a UBS survey, 44 percent of high-net-worth individuals planned on investing in developing economies in the next fiscal year. The BRICs (Brazil, Russia, India, China) provide ample opportunity for investment in construction, transportation, tourism and export-based infrastructure.
As these economies grow by 3 percent, 4 percent or even 5 percent each year, the investment opportunity for private capital is expanding. Additionally, the governments of these countries are usually friendly to private foreign investment, which can lead to favorable tax schemes and a positive-feedback loop of connections and opportunities.
While entering into these markets can be difficult without the support afforded by large amounts of existing capital, with the advent of the internet, investment in foreign markets can be lucrative for any savvy investor who does the right amount of research.
Cryptocurrency has been transforming industry, but it has also been a genius investment tool for the ultra-wealthy. Many early crypto investors were those who could afford to pour millions of dollars of capital into a currency or project. Many of the most tech oriented and futuristic minded among us have already entered the ranks of the ultra-wealthy through crypto-investment, as crypto thus far has provided a huge return for its early investors.
But it’s not done yet. New crypto projects are popping up every day in need of liquidity from high-net-worth investors. However, because crypto is an investment with no barrier to entry other than an internet connection, every one of us should consider investing in this area, as it offers a clear path to the top 1 percent.