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How Do Ultra-High-Net-Worth Individuals Invest? Thumbnail

How Do Ultra-High-Net-Worth Individuals Invest?

Financial Planning Insights Investing

It is pretty well understood among the highest-net-worth individuals, and people who aspire to be in that group one day, that you need to make your money work for you. Earning money is one thing, but putting it to work and using it wisely is a totally different ball game. That’s where a net worth advisor can help. 

A net worth advisor can help you decide how to invest your money. A good one, like ours here at Delta Wealth Advisors, will go over all sorts of financial options and help you consider a diverse range of investments, not just stocks and bonds. The fact of the matter is everyone’s investment plan is different, based on their current financial situation and their future financial goals, meaning cookie cutter portfolios won’t cut it. With that being said, there are definitely some common investing strategies, especially among the ultra-high-net-worth community. 

In this blog we look at:

  • ultra high net worth investing
  • alternative investments for high net worth individuals
  • high net worth investment strategies

What is Considered Very High Net Worth in 2022?

According to Forbes, high net worth individuals are broken up into three categories.

  1. High net worth individuals (HNWI): individuals or households who own liquid assets valued between one and five million dollars. 
  2. Very high net worth individuals (VHNWI): individuals or households who own liquid assets between five and thirty million dollars.
  3. Ultra high net worth individuals (UHNWI): individuals or households who own more than thirty million dollars of liquid assets. 

Now that we have established who qualifies as having ultra high net worth in 2022, let’s take a look at some of the ways UHNWI are investing. 

What Do Ultra High Net Worth Individuals Invest In?

The shortest answer to this question is… a little bit of everything. Ultra high net worth individuals invest in a variety of asset types. This means they invest in things like:

  • stocks and bonds
  • real estate
  • small businesses
  • foreign markets
  • physical assets
  • private equity
  • savings strategy

Of course, each ultra high net worth asset allocation is going to vary from person to person. You have to consider what high net worth individuals want, from lifestyle to risk tolerance. With that in mind, let’s take a look at some of the different assets listed above, and how they play into a big-picture investment strategy. 

Stocks and Bonds

Probably the most common type of investment, buying stocks and bonds provides a quick and easy way to diversify your portfolio. Stocks offer the opportunity to earn greater returns on your money in the long run, but come with some inherent risks. Bonds, on the other hand, are very low risk long term investments, but don’t yield the lucrative returns that stocks can provide. Other things to note include:

  • Pro- Can meet life’s unexpected needs
  • Pro- You can plan for tax consequences 
  • Con- Subject to extreme fluctuation, including severe depreciation or appreciation

Private Real Estate

Investing in real estate has several benefits, especially as part of a larger overall wealth strategy. Real estate can increase your passive income, provide leverage, and help establish a more steady cash flow. Additionally, real estate can naturally appreciate over time, making it a good long term investment. Other considerations include:

  • Pro- Higher income than stocks and bonds with more stable pricing during downturns
  • Pro- Offers tax advantages
  • Con- Non-Liquid investment, meaning you are locked in for several years

Small Businesses and Private Equity

Another important part of a diversified portfolio for UHNWI is investing in small businesses or private equity opportunities. Whether you are investing to passively multiply your money, or as a strategic partner, few investment opportunities pose the chance for such high (or low) returns. Other things to consider include:

  • Pro- Opportunity to multiply your money anywhere from 3-10x   
  • Pro- Chance to invest in different industries or passions
  • Con- Risk of losing all of your capital

Cash and Savings Strategy

Investing to increase your net worth is important, but having 100% of your money tied up might not be the best thing for you. In fact, the best net-worth strategy includes a savings plan. Saving can include things like minimizing your cash outflow, or can simply include keeping cash on hand. Also consider:

  • Pro- Funds desired lifestyle
  • Pro- Funds life and investment opportunities during recessions
  • Con- Incredibly limited income potential and devalued with inflation  

As an UHNWI or a HENRY (High Earner, Not Yet Rich), it is important to have a diversity of investments and strategies. That way you mitigate your risk while also optimizing your income potential.  

Delta Wealth Advisors, Finding the Right Strategy for You

At DWA, we know how important it is to put your money to work. With over 200 years of combined experience, we address every aspect of your financial picture to help you achieve clarity for your goals and how to attain them. Whether you are a UNWHI or a HENRY, with our holistic approach to financial planning, we’ll never leave you with unanswered questions. To learn more about our fee-only, commission-free, financial planning and tax services, head over to our website. If you are interested in getting to know us better or getting started, schedule a call today! 

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