Why the Rich Invest Their Money?

By Miguel Dos Anjos

They Grow Their Money

                The only way to meaningfully grow money is by investing. And that is exactly what the rich, and the super-rich do. They don’t just invest, but invest wisely on what they know, and understand. By investing on things they are knowledgeable about allows them bigger chances for higher returns, and removes the gambling feeling out of the equation. Nobody can fully predict the future, but by staying informed if an event happens that changes their investment growth, they still know how to behave. Let’s say in the case of stocks, if a lawsuit, or momentarily scandal happens, that stock may drop heavily, and most people will sale lots, or all, and fast. As this happens the rich, and prepared know, or intelligently decide if it is time to sell, or time to buy more, because they can see that the event will pass, and the stock price will reach once again its original value.

Get Higher Returns

                Timing the market well allows higher returns. Being able to buy low, and selling high requires knowledge, and do the opposite of what everyone else is doing. If everyone is buying, there is a chance that that’s when the richest will be selling. When everyone is selling, the richest might be buying. Carefully, because they cannot buy a hurting investment that is about to die, but instead; invest on a hurting investment that is about to pick up, and start thriving once again.

                A huge key the rich pay attention to in obtaining high returns in their investments is amount of time. Time is extremely limited. Most often the best approach is to start investing as soon as possible. An early start allows more time for compound interest to work its magic. Investing from age 24 to 59 allows 35 years of growth.

As we currently stand, facing a 10 years bull market, a recent “Bond Inverted Yield Curve”, and now a USA versus China trade war, the market waters aren’t too clear. While no one has a crystal ball; this is a good time to stand in a safer position, maybe invest in older companies that faces less risks, and companies that sale products that customers cannot stop buying, or would not need to stop buying because of its affordability. Also, sitting on cash might be smart to be ready for when prices drop, and a shopping opportunity arises.

Start Investing as Soon as Possible

By investing early, smaller amounts, the taken risk is smaller. Losing a 100 dollars, or few hundreds is less painful than saving 5 or 10 years, and only then start investing with huge amounts of money. That means a huge loss of compound interest, and growth plus investing a huge portion fast is dangerous, because we still don’t know if that’s the point the market will pick up or drop, not to mention, waiting to start with lots of money means not knowing how one will behave, the market can be nerve-racking.       

Allowing time for compounding interest to grow is more important than how much is invested. The rich knows that, and if for some reason they stop contributing, the money already contributed will keep growing.

Save for Hard Times, and Retirement

The rich save for hard times, and retirement. They take advantage of investing on retirement accounts such as 401k, building on pre-tax dollars, or a ROTH IRA paying taxes on it once, and letting it grow tax free afterwards. They know that besides investing as soon as possible investing bigger amounts may allow bigger returns. One more thing to keep an eye for is employer matching programs, which basically mean free money.

Stocks, and bonds are a great investment and allows liquidity, and the opportunity to invest smaller amounts. The rich, and super rich consider, and add variety to their portfolios. They will also hold a percentage of theirs investments in real estate, land, gold, or even artwork. They may invest in the country they live in, and also in other markets, and not only on public companies, but also in private companies. And lastly, the rich main focus is not to keep up with their peers, or follow the herds, but think independently, and knowledgeably.

My YouTube video on this topic: Why the Rich Invest Their Money