Where do rich people usually put their money?

In addition to specific investment channels that are difficult to access, the rich still keep their assets in cash, real estate or participate in the stock market.

Many people assume that the wealthy (those with a million dollars or more in assets) have special places to keep or manage their money that others don’t have access to. But according to SmartAsset, a US personal finance advice platform that reaches about 75 million people each month, high-net-worth individuals still put their money into common channels, including stocks, mutual funds, retirement accounts, and real estate. These are all channels that any investor can access.

In addition, the portfolio of the wealthy group still has some investment channels that are less accessible, mainly because they require large amounts of capital or need to review financial conditions before participating. SmartAsset lists the 6 most popular investment channels that millionaires invest in.

Cash and cash equivalents

Most millionaires are frugal. If they were always spending money, they wouldn't have any savings. They spend on necessities and a few luxuries, but they save and expect their families to do the same. Many millionaires keep a lot of their assets in cash or highly liquid cash equivalents.

The wealthy tend to have an emergency fund even before investing. Millionaires also bank differently than the rest. Specifically, any bank accounts they have are handled by a private banker. This is a specialized banking service model for high-net-worth clients, including wealth management solutions and all of the client’s financial and non-financial needs such as investments, inheritance planning, residency procedures, healthcare, insurance.

Studies show that on average millionaires can hold 25% of their assets in cash. This is to hedge against any market downturns and always have cash available as insurance for their portfolio.

Cash equivalents are financial instruments that are as liquid as cash. They are also a popular investment for millionaires. Common cash equivalents include money market funds, certificates of deposit, commercial paper, and treasury bills. Warren Buffett is one billionaire who favors cash equivalents.

Real estate

Real estate investing is another popular way for millionaires to make money from their assets. Typically, many people make their first real estate investment in a primary residence and then buy additional units to rent out. After buying some personal properties, others also start buying commercial properties such as office buildings, hotels, and stadiums.

Millionaires often have large real estate portfolios. Once they have established themselves as “players” in the market, real estate agents start to actively introduce them to attractive deals and the wealthy group can easily get finance from credit compared to other groups. Real estate may not be a highly liquid investment, but it can be profitable in the long run and is a really effective investment for those looking for passive income.

A recent report by Knight Frank - the world's leading real estate consultancy - also shows that commercial real estate holds a key position in the investment portfolio of the super-rich (accounting for 21%). Following are stocks and bonds. Passionate investment (art, fashion , antiques...) also holds a significant proportion.

Stock investment

Many millionaires love investing in stocks. They seek passive income from this channel because they don’t want to spend time managing other investments.

Ultra-high-net-worth investors may also have a controlling interest in one or more large companies. However, many millionaires tend to have portfolios that consist of only a few stocks. For ultra-high-net-worth investors, index funds are popular investments that can generate decent returns with minimal management time, low fees, and good diversification.

Other millionaires also look for dividend-paying stocks to generate passive income. Of course, they are also interested in the stock's appreciation, but for some, that is less important than generating current income.

Private equity and hedge funds

Listed stocks are famous for being traded on stock exchanges. One of their advantages is good liquidity. However, the wealthy are also interested in another way of investing in stocks through private equity funds. This type of fund specializes in investing capital in private (unlisted) enterprises or public companies and turning them into private companies.

Private equity funds typically receive capital from large institutions such as universities or pension funds. Individual investors must have a certain net worth, usually $250,000 or more. Private equity funds are not subject to as many regulations as public equity funds.

Hedge funds, on the other hand, are completely different. The funds collected from investors are invested in various financial markets by hedge funds. The goal is to earn superior returns for investors. Hedge funds invest in whatever the management team thinks will generate the highest possible short-term returns.

Tangible assets

Tangible assets such as gold, silver, and minerals are also storage for millionaires. These channels often require storage conditions and are more complex than the intangible assets mentioned above.

Some millionaires, the super-rich, keep part of their money in art, expensive musical instruments or rare books. This group also invests in intellectual property rights to songs or movies, which can be very lucrative investments.

Xiao Gu (according to SmartAsset )

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