Consider Past Investment Trends
If you want to invest like the ultra-rich, you first need to understand who they are, and how they have invested in the past. The ‘ultra-rich’ can be defined as those with a net worth of over £21 million, many of whom have invested and reinvested to reach this status, making past investment trends key to establishing and achieving your financial goals.
So, how have the ultra-rich invested in the past? For a lot of us, when we think of investment assets, our minds typically go straight to property, ISAs and stocks, for example. While property has long been a staple amongst the majority of investment portfolios, regardless of status, some unique assets have been chosen in the past.
From diamonds, to gold and quirky collectables, the ultra-rich often choose an eclectic array of investments, but whether these have been used to drive their ultra-rich status is another story. Despite the appeal of these unique investment assets, property remains a staple with 40% of the ultra-rich investing in the asset in 2018, closely followed by land and gold, with 20% choosing these assets.
With only 4% choosing to have precious metals as part of their investment portfolio, and 6% investing in collectables, the ultra-rich seemingly value more ‘historically reliable’ investments when maximising their wealth. The past performance of assets is undoubtedly a contributing factor to the ultra-rich’s investment plans, which should also form part of your financial planning to achieve your goals.
Explore Your Options
The past performance of an investment asset is just one piece of a much larger puzzle, with future forecasts having the ability to identify any potentially lucrative opportunities. As we already know, the ultra-rich have long been interested in the property market, but has Covid-19 changed these investment habits? And, how are they investing now?
While Covid-19 has impacted almost every inch of society in some way, shape or form, the global pandemic hasn’t affected the ultra-rich’s investments half as much as you might think. The overall population of the ultra-rich saw less growth than usual as certain economies across the world bore the brunt of Covid-19, but the most notable impact the global pandemic has had on this population is informing future investments.
According to research, 43% of the ultra-rich population are now more socially conscious, and have plans to translate this into their financial plans. Along with a focus on tech-driven opportunities, environmental, social and governance investments are ones to consider if you’re taking inspiration from the ultra-rich.
As well as a growing focus on more socially conscious investments, residential property is expected to continue dominating ultra-rich portfolios. Not only is property already a significant contributor to their investment profits, but 32% of the ultra-rich population is showing strong intentions of continuing with this asset in some capacity. The pull of property lies in its potential, with this asset not only holding its value, but in most cases, growing exponentially.
Edward Aldersley, CEO of Aldersley London, a company specialising in prime property, comments on the popularity of property amongst the ultra-rich: “The main reason behind this is that prime property, despite any minor fluctuations in the market, will generally hold/increase its value, because it will always be in demand.
“Plus, when prime property appreciates in value, no matter how small the percentage, that percentage is always worth significantly more in real money terms than the average UK property offering a higher proportionate capital appreciation.”
For 2021, handbags and fine wines are expected to make a resurgence in a lot of investment portfolios, after these assets demonstrated strong growth throughout the pandemic. With climate changes making certain wines more exclusive, and handbags experiencing notable price growth, we can clearly see the importance of exploring your investment options.
Invest, Invest, Invest
By this point, you know who the ultra-rich are, how they have invested in the past and their future plans, so investing is your next logical step. This is often easier said than done, but can be made much more manageable by breaking down the investment process.
The first stage of this is to establish your financial goals. While ‘being rich’ might be the end goal, you need to decide what this means to you. Generally speaking, the more specific this goal is in terms of numbers, the better, so you can establish smaller milestones along the way to continue motivating you throughout.
Gauging an idea of how risk averse you also forms part of these initial stages. The ultra-rich population is defined as ‘ultra-rich’ for a reason, meaning they can usually afford to take more risks, as a single asset is probably just one of many within their portfolio. Whereas if this is your first investment, or even an alternative to a pension, it’s crucial to do your research into the past performance of an asset and its future.
Once you’ve reached this point and have decided on your investment asset, you’ll want to get your finances in order. For property, this will, more likely than not, involve looking at mortgages, tax and potential returns. As discussed in the SevenCapital Investment Finance guide, you’ll typically be choosing between interest-only mortgages and capital repayment mortgages, both of which have very different terms that will inform your choices.
This step in the investment process is crucial, not only because your mortgage choice will likely influence the amount of monthly returns you see, but because this will usually determine the property you choose and how much tax you stand to pay. Whether it’s Stamp Duty Land Tax or subsequent income tax, everything should be considered at this stage.
If there’s one thing the ultra-rich have emphasised, it’s the importance of diversification. So, once you’ve taken the plunge into the world of investment, you should consider diversifying your portfolio to maximise your returns. This can be achieved in multiple different ways, but research has highlighted the diversification value of property, with 36% of the ultra-rich using this avenue to broaden their portfolios.
The ultra-rich status has long been a goal for a lot of us, and continues to be a motivator amongst investors. Whether you’re investing to achieve this status, or just want the best chances of maximising your investments, taking inspiration from the ultra-rich could make this journey much more manageable. From focusing on the resilience of an investment, to exploring different avenues and diversifying your portfolio, it’s obvious that these are key steps for the ultra-rich population.