There’s a misconception in the investing world that ultra-wealthy investors are all about sophisticated investing and complex strategies that are either too expensive, complicated, or inaccessible to the rest of us.
The truth is that the wealthy are less about flash and more about investments that are dependable and predictable.
They’re the tortoise to the mainstream investing public’s hare in the investing world. While the hare is all about flash and chasing shiny things, the tortoise plods along towards their goal of building and preserving wealth.
Most investors are surprised when they find out wealthy investors adopt a fairly basic investment strategy – to develop cash flow, minimize taxes, and preserve capital. That’s why they gravitate towards income-producing real assets.
The wealthy do have longer investment windows than the average investor. They’re looking beyond their retirement, and they’re looking to preserve their wealth beyond the grave for generations after they leave.
That’s why they aren’t just about high returns – not at the expense of capital preservation.
They’re not speculators. They’ve built their wealth with a strategy around cash-flowing tangible assets, and they want to preserve it for future generations using the same approach. They won’t risk capital to chase high returns.
Besides cash flow, there’s another reason the wealthy gravitate towards hard assets – to prevent themselves from making panicked decisions.
They understand human nature and know that they’re prone to the same impulses that drive every other investor in a time of crisis.
With that in mind, they know that in a time of crisis, and when markets become volatile, hard assets are illiquid and prevent them from liquidating at the sight of danger like everyone else. This is key to their capital preservation strategy.
This cash-flowing, wealth preservation strategy over chasing high returns is not exclusive to the wealthy. The type of alternative investments that build wealth through income while preserving capital for the long-term is available to qualified investors now more than ever.
Thanks to the JOBS Act, entrepreneurs now have more flexibility than before to reach out to potential investors to raise capital through advertising, general solicitation, and even crowdfunding platforms.
Investors can find numerous investment opportunities through Google and social media searches.
Gone are the days of needing millions of dollars for direct investment or hundreds of thousands of dollars for an exclusive private fund. Many funds on crowdfunding platforms take investments in increments of hundreds of dollars and not hundreds of thousands of dollars.
The beauty of the private markets is the diversification benefits.
In the private sector, diversification can be accomplished across a variety of factors, including:
- Asset Class.
- Stage of Development.
- Security Type.
- Type of Return.
- Holding Period.
- Geographic Location.
This multi-level diversification structure is ideal for preserving capital in a downturn. This is another reason the wealthy love cash-flowing real assets. In a downturn, one particular asset may suffer decreased cash flow, but the rest of the portfolio should be able to sustain the portfolio.
There’s nothing fancy about how the ultra-wealthy investor.
They don’t chase high returns, and they favor cash-flowing real assets that build and preserve wealth.
These types of assets are now available to qualified investors of all kinds – many with minimal capital requirements.