Billionaires have been able to not only acquire wealth but most have gradually built it over time. This means that many have had successful investments, which makes it natural for everyone else to wonder where they are investing or keeping their money in order to see that growth. We’ve compiled a list of some of the most common investments that billionaires make when looking for sustained growth of their money over time. Keep in mind, though, that billionaires don’t typically manage their own money and instead choose to work with a financial advisor to help with their asset allocation.
1. Cash and Cash Equivalents
Cash and cash equivalents are common places where billionaires keep of some their money. Though not often thought of as an investment, cash is a liquid asset, meaning you can use it in a variety of ways as needs or desires arise. In a crisis, having cash on hand gives you the flexibility to respond. That’s why billionaires keep a significant portion of their money in cash and cash equivalents.
However, with current rates of inflation, cash has less of an emphasis. Inflation causes the value of money to drop, so having too much of it on hand during an inflationary period can mean you lose significantly.
2. Commodities
Commodities are often another piece of a billionaire’s portfolio, and having such assets can help hedge against risk, inflation and volatility. For instance, in a scenario where inflation is causing difficulty for the rest of the market, having investments in raw materials whose price is rising can help protect you if other parts of your portfolio are suffering. People and economies depend on commodities, and inflation makes them worth more money.
Raw materials and agricultural products – like precious metals, industrial metals like copper, oil and natural gas, coffee, corn, pork bellies and soy beans – are popular types of commodities held and traded by billionaires or their agents.
3. Foreign Currencies
Holding foreign currencies offers billionaires the potential to capitalize on fluctuations of value in various currencies. It is simply a form of diversification: Rather than have all their assets denominated in one currency, they spread some of their wealth to assets denominated in other currencies. That offers protection against one currency falling and it also offers the prospect of capital appreciation if another currency in which they have assets gains value.
4. Securities
Another common place where billionaires keep their money is in securities. Securities are financial investments and instruments with some value that can be traded, oftentimes on public markets. Common types of securities include bonds, stocks and funds (mutual and exchange-traded).
Funds and stocks are the bread-and-butter of investment portfolios. Billionaires use these investments to ensure their money grows steadily. Billionaires typically hold onto these investments, instead of trying to time the market for a quick buck. That means they’re relying on the long-term upward growth of the market to give them a return.
5. Private Equity and Hedge Funds
Private equity and hedge funds sit adjacent to securities and trading markets. While they aren’t the same thing, these two types of investment tools are popular among billionaires. They appeal to people of high net worth who can afford large investments and higher risk. Such people are sometimes categorized as sophisticated investors or accredited investors.
Hedge funds use large pools of money and strategic investments in a variety of assets to generate high returns. Private equity, on the other hand, trades in privately owned businesses with the goal of running the business for higher profits. Both require a significant amount of money to participate, keeping them from being an option for many investors.
6. Real Estate
It should come as no surprise that one place billionaires keep their money is in real estate. One of the most common ways to invest in real estate without worrying about constant maintenance is to put your money into real estate investment trusts (REITs). This can provide you with a strong return while someone else manages the investments and management of the physical properties.
Commercial, industrial and residential property investments can also offer a steady stream of income from tenants. Of course, owning real estate is great when its value is growing, but what about other reasons? Another advantage of owning real estate is taxes. For instance, if your property depreciates, it’s deductible from your taxes.
7. Collectibles
When billionaires are looking for places beyond traditional investments to keep their money, they might turn to tangible, collectible investments. These often include pricey collectible items, like vintage cars, fine art and rare or antique musical instruments and original manuscripts of famous books. While all successful investing requires research, it’s especially true for collectibles. The investor needs both an interest in the items, but also a discerning eye and the ability to not become immediately emotionally invested.
8. Cryptocurrencies
Cryptocurrencies – like Bitcoin, Dogecoin and Ethereum – are volatile and intimidating to many, including billionaires, but some billionaires have chosen to invest in them. The truth is digital currencies are growing in legitimacy and value. Cryptocurrency – and the blockchain it’s built on – is a revolutionary technology that could change many industries.
Part of the appeal of crypto for billionaires is that it allows for a secure store of value. Due to cryptography, the money can’t be taxed, stolen or confiscated. It’s also apolitical and free of government oversight. Plus, it can be used globally without worrying about shifting exchange rates.
Of course, cryptocurrencies are still unpredictable and have yet to gain widespread use. That keeps some billionaires from investing, but others see crypto as another opportunity to grow their wealth, or at least protect it from taxation. These currencies also make it easy to move money or pay for things in other countries.
The Bottom Line
You may not be a billionaire, but you can still see how they make their money work for them. By learning where billionaires keep their money, you can pursue some of these investment types yourself in order to grow your own wealth. Cash stored in savings and investments in a diverse portfolio of securities and commodities is a good starting place, but the more wealth you acquire the more you can invest in more aggressive opportunities.
Tips on Investing Like a Billionaire
- Billionaires didn’t become rich without help, so there’s no reason you should struggle alone. You can work with an experienced financial advisor to help you create a financial plan and allocate your assets correctly. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- If you’re ready to know your investments better, one step you can take is calculating your rate of return. See how the growth of your investments over time will affect how much return you see. Check out SmartAsset’s investment calculator to get started.
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As an enthusiast with a comprehensive understanding of investment strategies and financial markets, I can provide valuable insights into the concepts discussed in the article. My expertise is grounded in a solid foundation of financial knowledge, market trends, and investment principles. Let's delve into the various investment concepts covered in the article:
1. Cash and Cash Equivalents
Billionaires allocate a significant portion of their wealth to cash and cash equivalents. These liquid assets, such as money market funds and short-term government bonds, offer flexibility and act as a safety net during crises. However, the article notes that excessive cash holdings may result in losses due to inflation.
2. Commodities
Commodities serve as a hedge against risk, inflation, and market volatility for billionaires. Investments in raw materials like precious metals, industrial metals, oil, and agricultural products can counterbalance losses in other parts of their portfolios during challenging economic conditions.
3. Foreign Currencies
Diversification through holding foreign currencies allows billionaires to capitalize on currency value fluctuations. This strategy provides protection against the depreciation of a single currency and the potential for capital appreciation in currencies gaining value.
4. Securities
Billionaires invest in securities, including bonds, stocks, and funds, as part of their portfolio. Stocks and funds, both mutual and exchange-traded, are considered fundamental to long-term wealth growth. The approach involves holding onto these investments rather than attempting short-term market timing.
5. Private Equity and Hedge Funds
Private equity and hedge funds are popular among high-net-worth individuals. These investment tools involve higher risk and require substantial capital. Hedge funds employ strategic investments across various assets to generate high returns, while private equity focuses on privately owned businesses for increased profits.
6. Real Estate
Real estate is a common avenue for billionaires to preserve and grow their wealth. Real Estate Investment Trusts (REITs) offer a way to invest without direct property management, and various property types, such as commercial, industrial, and residential, can generate steady income and tax advantages.
7. Collectibles
Billionaires may diversify their investments by acquiring tangible, collectible assets like vintage cars, fine art, and rare musical instruments. Successful investing in collectibles requires research, a keen eye, and a level-headed approach to avoid emotional attachment.
8. Cryptocurrencies
While volatile, some billionaires invest in cryptocurrencies like Bitcoin, Dogecoin, and Ethereum. Cryptocurrencies offer a secure store of value, global usability, and freedom from government oversight. However, their unpredictable nature and limited widespread adoption pose challenges for some investors.
The article concludes by emphasizing that understanding where billionaires invest can guide individuals in growing their wealth. It suggests starting with savings and a diverse portfolio of securities and commodities, gradually exploring more aggressive investment opportunities as wealth accumulates.
Additionally, the article encourages seeking the assistance of experienced financial advisors to create a customized financial plan and allocate assets effectively, reinforcing the notion that billionaires often work with professionals to manage their wealth.
