Market Monday: Investment Allocation by Net Worth

Who: The wealthy people of the world.

What: Where are the super-rich investing?

When: Current investments.

Why: To understand why the 1% received 82% of all wealth created in 2017.

My Thoughts

Here is the thought that is on my mind this week! Check out this chart provided by marketwatch.com showing the net worth composure of wealthy households.

Courtesy of MarketWatch.com

Interesting stuff!

Studying those who have a great level of success is a must in my opinion. Even if your goal is not extreme wealth it is important to learn how to generate money!

You trade your time for money everyday so spend a little extra time each day to educate yourself.

One of the takeaways that stood out is that those with little to no net worth have their money tied up in a vehicle and home. So, what can be learned if you are striving for more than a 100k net worth?

KEEP YOUR PERSONAL HOUSING AND VEHICLE SITUATION AFFORDABLE.

The other massive takeaway is that the ultra-rich own some sort of business interest. There is big risk with starting a business or investing in one. However, it shows in this chart that the reward can be handsome as well.

Learn something every day, take something away from this chart.

Figure out what your goal is. Where do you want to be on this chart? What is a realistic way to get there?

Then begin taking strides to position yourself for success.

Happy Monday everyone!

What Are Your Thoughts?
  1. Does this meet your expectations of where the rich are invested?
  2. Does this match your net worth depending upon where you fall on the chart?
  3. How will you pivot your net worth to change your life?

Spread The Wealth!

22 Comments on “Market Monday: Investment Allocation by Net Worth”

  1. I like Market Mondays 🙂 . To get some alliteration going, maybe throw in Millennial somewhere.

    Nice post, DM – that chart / image is very cool and helpful – and bingo on the business interest.

    It’s also good to see this in terms of percentages instead of absolute values to compare across the various net worth buckets.

    Thanks for sharing. – Mike

    1. I like it Mike, but then I would leave out all the awesome non millennials!

      The business aspect is always weighing on my mind. In the US starting a “successful” business is an escalator to wealth.

  2. That’s a nice chart and along the lines of what I expected. Business is the way to go! I am reading the Dhandho Investor right now- it’s an excellent book- businesses can be so profitable. Mohnish Pabrai invested $30K of his own 401(k) into his business and sold it for millions after.

    1. That looks interesting I will have to add it to the list. So many great books so little time.

      Always love those investment stories!

  3. I think the net wealth allocation of the super rich makes sense…to get that rich you really have to own a business!

    I think the most interesting thing is that the allocation for bonds, mutual funds, and stocks isn’t too much different between the super rich and the middle class.

    The primary difference is the amount of business wealth for the super rich vs. retirement accounts and the primary residence for the middle class…which also makes sense. I always hear about stories of people cashing out of their 401(K) or selling their house to start a business.

    1. Good observation. To be super rich I think that you generally are going to be a large owner in something that “blows up”.

      That one business might end up making all your other investments of the past look tiny. Most PWM (private wealth management) is in the 25+ mil range and usually they will help those business owners diversify a bit down the road.

      I think I would hold onto a roof over my head and some other investments as a back up plan. So many businesses fail, that certainly doesn’t mean that people shouldn’t swing for the fences though. I think if people are patient they can have best of both worlds.

  4. DM, I find it interesting that mutual funds, stocks and fixed income investments being some of the most liquid and accessible assets in the chart represent such a small percentage in all net worth brackets. I think I’ve done pretty well, but it make me wonder what I’m doing wrong?? Or, am I right and the masses got it wrong. Not sure. I love this kind of macro data. Great post. Tom

    1. I don’t think it is that you are doing anything wrong. Many different ways to wealth.

      My interpretation is that to build mega wealth fast you own a business. Over time working and investing you can end up a decamillionaire these days with the right investing strategy and a high income from a W-2.

      In one lifetime though it gets pretty tough to move past that without some big windfalls other then a yearly salary.

      Also important to realize that everyone has different goals out of life. We are talking about amazing amounts of wealth here.

  5. I think you have two great takeaways with keeping costs of vehicles and housing in line. The two other things I took away from this was ample diversification as your net worth grows and those that make it to the $100m mark or more likely started a business or have an sizable ownership stake in a private company. Something to think about.

    1. For sure. Everyone has different goals and I think that in America you can hack your way to a multi millionaire with just the W-2.

      In the long run though you need ownership in a company that hits it big to really cash out.

  6. Very interesting graph. Like the others have said and the numbers show, the super rich really have their assets tied into their businesses. I figured real estate would be a bit higher for the heavy hitters.

    1. I agree with you I was surprised by the real estate as well. My best guess is that some of those business interests were real estate companies, syndicated real estate etc.

      I think that it might be a bit misleading in only showing personal residence.

  7. This makes sense. If we google the most wealthy people in the world, the top 10 definitely have significant interest in businesses. There’s no doubt profit sharing is huge. They are very actively involved in those businesses as well. Ofcourse with those risk is involved which can yield the most profit and I think the super-wealthy are ready and willing to take on the risk.

    1. Yep, and as their wealth grows the risk becomes much smaller. Once you cash out your first business and enter the 1% you can have a large safety net compared to the majority of people out there and still roll the dice on another one.

  8. Hey DM!

    Super-interesting chart. I had a vague idea about wealth and business interests, but this really brings it home. It’s my impression that to be high-level wealthy, you usually need to have an ownership stake in a business.

    I’ve seen this with doctors. For example, a specialist who works for the government or a private employer may make make 250-600k (or more or less, depending on many factors). However, I know about a surgeon that owns both his own practice and a post-surgery physical therapy facility. My impression is that he must be making a million-plus.

    From what I’ve seen, the surest route to fulfilling those “champagne wishes and caviar dreams” is entrepreneurship.

    1. Great example Miguel! That example is why it is important to never stop learning. Many people would work for the private employer and rest on a 400K income.

      Yet if they continued to learn and grow they could triple or more their income. I am a big fan of continued learning and not resting on a lifestyle.

  9. Ah, business…

    I know easier said than done, but a successful and well thought-out business is the road to riches. We always hear stories about failures, but if someone is has all the three Ps (patient, perseverance, AND PASSION), more likely than not, something will work out. As you can see, on any given day rarely any human can carry out at least one of those Ps, let alone all three of them (I admit I’m likely one of them too).

    Even if they don’t become a multi billionaire, they’ve made it far enough to be considered as rich.

    Overall, I love this chart and the link you included! Thanks for sharing!

    1. I like the three P’s!

      The overall goal shouldn’t start with pure dollars but rather how does a business solve a problem. The greatest businesses in the world solve the biggest problems.

      If you can even solve a smaller problem in a local community you can have great success. There are some fantastic small businesses out there that could put you firmly in the 100+ million range.

  10. Nice chart! Not surprising, well maybe a little surprising. I would have thought that stocks and equities would have been a larger percentage of the more wealthy households assets. But I suppose on average more people get wealthy by starting a business. Another nice chart would show possible of how many businesses are started, how many last 10 years, 20 years, etc.

SPEAK UP!