Tom Nash
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How To Invest Like The World's Wealthiest People
🕑 Added 2023-07-10 07:35:22 +0000 UTCLook, let's be honest, investing EXACTLY like the richest people in the world is not going to work everyday people. It's a completely different game when you are playing with 7 figures vs. a $50,000 portfolio.
Having said that, there is MASSIVE value in looking at how these folks manage their portfolios so we can understand their approach, process and strategy and apply it to our own investing style.
So check this out. Vanguard actually examined 800,000 accounts with balances exceeding half a million dollars, and found three important takeaways:
1. On average, the allocation for these accounts was 64% stocks, 23% bonds, and 13% cash. Younger investors allocated around 90% of their portfolios to stocks, compared to 60% with accounts held by retirement age investors.
2. On average, 43% of the portfolio was in active investments, while 57% was allocated to low-cost passive index funds and ETFs.
3. On average, 81% were in U.S. stocks, while 19% in international investments.
So here is the thing: rich investors trust the S&P500 more than international options, which is something I have been preaching for years. They also put most of their money in an ETF structure, which is exactly what I have been talking about as well.
They also DO hold bonds, despite the recent hate from younger investors and they keep 13% on the side to double down when they see a chance open up, which is exactly in line with our DCA strategy.
Obviously, these are just general principles and every single investors will have to align their asset allocation with personal financial goals, risk tolerance, and investment horizons, but the concept is very clear:
Manage a diversified portfolio that includes mainly U.S. equities, bonds, and cash, focusing most on passive index funds and ETFs and leaving a bit for individual stocks.
Open to any follow up questions below.
Tom
Comments
Imran Awan
Thank You
Generico Fakero
The best strategy for most investors is to buy the S&P500 and hold it. Simple as that.
Imran Awan
Thank you Tom for sharing your valuable insights on portfolio management. In your blog, you highlighted the significance of maintaining a diversified portfolio comprising predominantly U.S. equities, bonds, and cash. You emphasized the importance of prioritizing passive index funds and ETFs while also allocating a portion to individual stocks. If you have any recommendations, I would greatly appreciate your insights on some noteworthy choices within these categories, specifically focusing on predominantly U.S. equities, bonds, ETFs, and cash, with an emphasis on passive index funds.
