How the Rich Plan to Stay Rich in 2023

By Matthew Milner, on Wednesday, October 19, 2022

Are the rich really so different from everyone else?

After all, we all put on our pants one leg at a time. And no one’s immune to nuisances like the common cold or hangovers.

But in at least one important way, the rich really are different.

Today, I’ll explain how this difference is making them even richer…

Then I’ll reveal how to make yourself richer.

It’s Been a Tough Year for Main Street Investors

When most folks invest, they stick with stocks and bonds.

For decades, the “typical” portfolio for Main Street investors has been 60% stocks, 40% bonds.

A 60/40 portfolio is meant to provide growth as well as stability. So even if your stocks are crashing, hypothetically, your bonds should keep you above water.

But it’s been a tough year for such investors...

The stock market’s been terrifying. But at the same time, bonds are getting crushed, too. This explains why, as of the end of September, a 60/40 portfolio was down 21% for the year.

Historically speaking, the S&P 500 and the 10-year Treasury Bond have never been down more than 10% at the same time. But that’s exactly what’s happening right now…

And for Main Street investors, it’s led to crashing portfolios and surging anxiety.

An Alternative to Stocks and Bonds

But the rich invest differently…

They don’t have “typical” 60/40 portfolios. And this difference might explain why they keep getting richer.

You see, according to the Motley Fool, the rich mainly invest in “alternative assets.”

What are these alternatives? Well, for starters, they include private startups and private real estate deals — the kind we focus on here at Crowdability. But they also include “collectibles” including fine art, baseball cards, vintage sports cars, and wine.

In 2020, the wealthy had about 50% of their assets in these alternative investments, and just 31% in stocks. The remainder was made up of bonds and cash.

50%! Why would they do such a thing? Let’s take a look…

Three Reasons the Wealthy Invest in Alternatives

For starters, investing in alternative assets provides diversificationSo even if the stock market and the bond market keep crashing, these assets can keep growing in value.

Furthermore, alternative assets can offer a hedge against inflation. In inflationary times like we’re in today, that’s a valuable trick.

But perhaps most important of all, they can provide market-beating returns.

For example, over the last 25 years, early-stage startup investments have provided 55% annual returns. That’s about 10x higher than the historical average for stocks.

And meanwhile, according to the Motley Fool, over the last decade:

  • Wine has shot up 127% in value.
  • Classic cars have gone up 193%.
  • And rare whisky is up an astonishing 478%.

So how do you get access to these alternative investments?

Let’s take a look.

Access for All

Recently, a new type of website has popped up to give ordinary investors the ability to invest in everything from fine wine to fine art.

Essentially, just like you can buy a $100 stake in a startup, now you can buy $100 worth of a vintage Bordeaux, or of a classic piece of art from Keith Haring or Basquiat.

Here are a few of these websites you can explore today:

Otis — On Otis, you can invest in collectibles including baseball cards, limited-edition sneakers, comic books, and art.

Collectable — This site specializes in sports. Its offerings include everything from a sports jersey worn by Willie Mays, to the sneakers Kobe Bryant wore in his 1996 NBA rookie game. It also offers a secondary market, so you can aim to sell your investments at any time.

Rally — Here you can find everything from vintage Porsches to one-of-a kind offerings like the double-necked guitar used by Slash from Guns N’ Roses. And similar to Collectable, Rally offers investors a way to sell their shares.

Beware!

Keep in mind, all the typical caveats about investing apply here:

For example, don’t invest more than you can afford to lose; invest in what you know; and be sure to dip your toe into the water before diving in.

Furthermore, many alternative investments aren’t entirely “liquid.” That means they can’t necessarily be converted into cash at the snap of your fingers.

So please don’t invest your rent or grocery money into these offerings.

But if you’re looking to invest like the rich, these platforms are a great place to start!

Happy Investing.

Best Regards,
Matthew Milner
Matthew Milner
Founder
Crowdability.com

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