Invest like a billionaire: follow the steps of the 1% and learn their strategies

It’s not Vegas 

You’ve heard of teenagers making a fortune on Robinhood, NFT’s and Bitcoin investments. Although these tools may have attracted a lot of the headlines, they are still like a slot machine whose casino has decided to visualise profit with just one or two examples. Most investors belonging to the 1% choose to ignore these instruments.

You and I have the same tools the billionaires and serious investors exploit to enlarge their portfolios. Today, with the freedom of information and web-based access to a variety of helpful platforms, even if you aren’t paying a Wall Street broker to manage your investments, there are plenty of forums, news sites, newsletters and YouTubers who provide genuine insights into the financial world.

The meat and potatoes 

While it may seem obscene to think about, the rich literally make millions in investing in just plain old stocks and bonds. These are like the meat and potatoes when it comes to investing, they are the primary course in a sturdy portfolio. In fact, it is extremely rare for a millionaire or billionaire to not have investments in stocks and bonds.

There are some other investments as well, such as art, real estate, private equity and hedge funds, but starting off with stocks and bonds is the most assuring investment choice you can make. 

Stocks tend to be a high risk because they can dramatically increase and decrease on any given basis, and are volatile to external factors. However, you are likely to find a reliable stock by researching a company prior to investing. Using charts and news articles can help you to determine if a stock is reliable. Bonds, issued by major governments, are the safest bet when investing. Allocating your stocks, bonds, and other investments, and diversifying your portfolio are the strongest pillars in maintaining success for both the amateur and professional investor.

Let’s talk real estate

Investing in real estate is a major alternative investment to consider because it provides substantial benefits and few risks. Housing markets on a global scale are increasing, bringing benefits to both homeowners and landowners.

If you’ve ever seen Selling Sunset on Netflix, you know real estate is a profitable gamble. That being said, there are less traditional ways of investing in the housing market. A lucrative and strategic method of investing in real estate that the 1% do is via the stock market. Real Estate Investment Trusts (REITs) enable the general public to take part in the realty market.

You can find a list of REITs on the stock market. There are two main types: the Equity REITs and the Mortgage REITs. Equity REITs are the owners and operators of the properties; their income comes from rent. Mortgage REITs do not own property but rather they invest in mortgages and use their cash to buy or issue mortgages on properties, then collect income in the form of monthly interest payments from borrowers. They are both stocks but companies that buy properties fill them with tenants and then collect a rental income. REITs tend to have a historically stronger return than owning real estate solely.

What about Private Funds?

People who buy private funds are those who want to avoid the stock market and look into something like a private real estate fund. Such funds are not the best choice for the average investor because they are managed by a team that charges investors a fee of their profit. Investors tie their money up for a set of time, so there’s less “liquidity”. This is why it’s better for an average Joe to invest in a publicly-traded REIT. 

On a serious note: private equity firms and hedge funds

Some risky investments that the 1% do are with private equity firms and hedge funds. Private equity firms are investment management companies that invest in private businesses with money they’ve raised from investors.

Hedge funds, on the other hand, are investment funds that invest across the spectrum of stocks, bonds, currencies, commodities, and derivatives (options and futures). The goal of a hedge fund is to maximise investor returns and eliminate risk. They tend to be aggressive and risky. According to a Capco study, 50% of hedge funds shut down because of operational failures. Which the 1% can afford to gamble with.

Tread with wisdom and prudence 

To conclude, the secret to investing like the billionaires is to diversify your portfolio. Think about alternative investments including stocks and bonds, but also real estate, art and private equity. Make sure you have the funds to invest and allocate time to researching your investments thoroughly.

Who knows, maybe you’ll strike gold. In any case, investing with wisdom and prudence will help you solidify your portfolio so that one day you can reap the rewards. You may be giving the same advice to your children and grandchildren who will all become financially independent thanks to you. Even if you don’t make it to billionaire level, at least you can have the assurance of a debt-free life.