Aug 152016
 

Asset Allocation for the Wealthy

I don’t always recognize good investment opportunities when I see them. But I do know that we should never invest in funerals… because it’s a dying industry. But when I run out of investment ideas I usually turn to the wealthy.

I think it’s extremely important to follow what rich people do. It gives us insight about financial opportunities that we should be aware of. People with extremely high net worths tend to have either a natural knack for managing money, or are at least smart enough to hire the best advisors to invest on their behalf. Of course wealthy people don’t make the best investment decisions all the time, but their historical performance is consistently higher than the average Joe, which is how the rich continues to stay rich. 🙂

One way to track the “smart money” is to follow the quarterly member surveys from Tiger 21, an exclusive network of high net worth investors. To get into this private club all you need is to have a minimum net worth of $10 million. Easy right? 😛 This confidential and anonymous survey asks members about where they have their net worths allocated.

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Almost all participants are either self made investors or entrepreneurs with a good eye for business trends. With hundreds of members spread across North America, the results of the survey should represent a fairly accurate cross section of investment opinions from some of the most sophisticated millionaires and billionaires in the world. So what have the wealthy been doing during the last year? For the most part they have decreased their exposure to real estate and increased investments in private businesses. 🙂

Below we can compare the Tiger 21 survey results from the first quarter of last year with the same quarter this year.

Q1 2015 – Member’s Asset Allocation

  • Real estate – 29%
  • Cash – 10%
  • Fixed income – 11%
  • Hedge fund – 7%
  • Public equities – 23%
  • Private equities – 18%
  • Other – 2%

Q1 2016 – Member’s Asset Allocation

  • Real estate – 25%
  • Cash – 10%
  • Fixed income – 11%
  • Hedge fund – 8%
  • Public equities – 22%
  • Private equities – 23%
  • Other – 1%

As we can see, allocation to real estate has declined from 29% to 25% of holdings. However, it still remains above the historical low of 19% back in 2009. Allocation of public equities, which is basically the stock market, also declined by 1% even though North American stock indices are higher now than last year. This indicates that rich people have collected some profits by taking money out of both the stock market and the real estate market. Then they put most of those proceeds into private businesses.

Not only have these high networth individuals shown us promising places to put money, but through omission they’ve also identified where they think the risks are. By following their lead we can gain useful insight about new opportunities in asset classes that we could then add to our own portfolios. 😀

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Random Useless Fact:

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10 Comments on "Where are Rich People Putting their Money?"

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Anon
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Anon

“I think it’s extremely important to follow what rich people do…By following their lead…”

Dead wrong.

I’ve been tracking T21 for the last 10 years or so, merely out of interest, as it’s a unique group (with the intentions of members has changed during the latter years).

However, their investment goals are much different than the average persons, therefore the average investor must have much different allocations. Not only that, but the members of Tiger have access to all kinds of deals that are not available to the average retail investor, thus rendering their allocations moot for almost all of us.

The amateur PF blog gets it wrong, once again. Think before you write, think after you read.

beth
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beth

Are you a tiger?

Money Beagle
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It’s interesting that the rich are staying away from the stock market, relatively speaking, given the recent melt up. I think that’s a warning sign.

Anon
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Anon

“The rich” are NOT staying away from the stock market.

Tiger21 members have a particular mindset which dictates their allocations; they have always had a low allocation to public equities. The rich, in general, still own a great deal of the stock market.

Phil
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Phil

Follow the herd… If you want to be wealthy, know what your time is worth, live on less than you have coming in and always stay atune to where others are spending their money, not necessarily investing their money. If you follow cash flow and understand your own, wealth will become you 😉 Extra data is always interesting, but where rich people are putting their money… well have a look where they were putting it in 1921, 1932, 1949, 1982, maybe 1999 and 2007… Being rich does not make you immune to herd mentality that makes and breaks the bank – Cheers

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