Investing Like the Ultra Wealthy
You cannot find true freedom until you invest like those with all the freedom. Ultra-wealthy investors who are completely unbound by schedules or obligations – the ones that fill their calendars with only the things they want to do – all have investing habits in common. If you envy their lifestyles, learn how they achieved them.
Fact: The smartest investors allocate a majority of their portfolios to two particular sectors that outnumber stocks 2:1.
Fact: Most billionaires and millionaires are self-made.
Fact: The ultra-wealthy got their start by mimicking the habits of the ultra-wealthy who came before them.
Fact: The two sectors the ultra-wealthy gravitate towards share common characteristics that are ideal for wealth building. These two sectors are private equity (i.e., private funds and companies) and real estate. There is overlap between the two sectors because when the ultra-wealthy invest in real estate, they almost exclusively invest in commercial real estate passively through a private fund.
What is Tiger 21? You’re probably wondering if it’s a Hong Kong blackjack parlor. The reality is, Tiger 21 is an exclusive peer-to-peer investment club consisting of 500+ members in 29 cities in the United States, Canada, and the United Kingdom. The primary goal of the group is to help each other preserve wealth. The members of Tiger 21 are also out in public preaching the gospel of wealth-building – routinely appearing on the internet and cable financial news outlets. They also publish articles and release a quarterly report on their investment allocations – all made available on their website.
Are the investment habits and allocations of the members of Tiger 21 worth studying and mimicking? That’s up to you but based on results, and I would pattern my investing behaviors after the members of Tiger 21 before I followed the advice of every Dick, Tom, and Harry pushing you to buy a “system” for creating wealth out of thin air. The difference between the members of Tiger 21 and the gurus angling for your dollars is the members of Tiger 21 have nothing to gain from sharing their knowledge with you. Go to their website and read their articles for free. I promise you you’ll get more out of that than sitting through another “ra ra” get-rich-quick webinar.
Are the members of Tiger 21 credible? First of all, each member must show a minimum of $50 million of investable assets to join. The network numbers are undoubtedly much higher. Collectively, the total membership manages approximately $50 billion in investable assets – each paying annual membership dues of $30,000. Broken down by members, each manages an average of more than $100 million of investable assets.
What can you learn from ultra-wealthy investors like the members of Tiger 21?
- Be proactive. The members of Tiger 21 don’t rest on their laurels. Why do you think they pay $30,000/yr. to network with other ultra-wealthy individuals? Do you think it’s so they can sit around sipping champagne, smoking cigars, and talking about The Office? No. They want to get in on deals that other smart investors are involved in. They are not waiting for deals to come to them. They are going to the deals. They trust each other to vet the right opportunities.
- Invest in tangible assets. The ultra-wealthy prefer assets they can touch and feel that have intrinsic value – value apart from the market price. The intrinsic value of commercial real estate comes from the rents generated from leasing activities and the underlying land that appreciates over time. In other words, tangible assets will always retain value no matter what the flavor of the month is with the investing public. You can never lose your entire investment with these types of assets because they will always have value. The same can not be said of stocks of worthless companies or cryptocurrencies with no inherent benefits.
- Hedge against downturns and inflation. Stocks and speculative investments like crypto are the first to hemorrhage value at first sight of trouble. This is due to their liquidity. When the herd starts to stampede, everyone will unload their stocks and crypto because they can do so at the swipe or click of their phone. Long-term investments like private equity and real estate prevent investors from creating runs in the market. That’s why they’re better insulated from downturns. Additionally, essential assets like affordable housing keep pace with inflation because consumers will unload luxuries when buying power becomes pinched.
- Keep more of what you make. Equally important to the ultra-wealthy as making above-market returns is retaining more of what they make. That’s why they avoid any investment arrangements where the promoter or manager gets paid whether you lose money or not. That’s why hedge funds are virtually ignored by the ultra-wealthy. Despite most hedge funds failing to beat the market, the fund managers are still able to collect a 2% annual asset management fee. The ultra-wealthy prefer to partner with sponsors who put the investors first and get paid only if you get paid.
Continuing this theme of retaining more of what they make, the ultra-wealthy leverage the tax code to maximize the tax benefits available to them. Passive private equity and commercial real estate investments offer a myriad of tax benefits and deductions not available with Wall Street investments.
The Road Ahead
If you’re looking for the map for the road to financial freedom, it’s in the care of the ultra-wealthy, and they’re happy to share it with you. You have to look and be willing to change certain investment habits. It has worked for ages and will work for generations to come.