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Wealth Management and Rich People

Why Did the Top One Percent of Rich Americans Have a 3.73 Gain Last Year?

 

The top one percent of wealthy Americans saw a 12-month gain of 3.73 over the past year, whereas the bottom one percent of investors saw a negative 3.32 percent return, according to CNN Money. The difference? It’s all in how they invest. What wealth management tips can you take away from this?

One classic investment success strategy focuses on spreading out their investments, which means if one stock isn’t doing well, it’s not going to significantly impact the entire portfolio. Lower gains are sometimes seen when an investor places the majority of investments in single stocks, such as major companies like Apple or Ford or Bank of America, making your investment gains or losses highly dependent on the performance of that company.

More specifically, the top five percent of investors have less than 40 percent of their investments in a single stock. The bottom five percent have around 70 percent of their investments in a single stock, making them more vulnerable to market volatility.  CNN’s report shows the volatility of a wealthy investors’ portfolio is around 15 percent, whereas the bottom investors work with volatility in the 33 percent range.

How Can You Invest Like the Wealthy?
As an investor, you want to plan for long-term gains, which means you will want to spread the risk among your investments. Many young investors will put a higher percentage of investments in stocks that are more susceptible to volatility; sometimes they can see tremendous gains. But this can be risky when you face downturns. However, when balanced with other investments, the outcome can level out successfully over the long-term.

When it comes to wealth management, many experts warn against gambling on the market. It is also important to remain emotionally neutral about your investments while sticking with your investing goals, which must also evolve over time. This means you may have to ride out a poor economy when it comes along, instead of making rash decisions based on fear about the market. You may also have to avoid the advice of family and friends. Although well-meaning, they’re typically not experienced professional investment advisors. Work with a professional; the outcomes are too important.

Don’t believe the myth that “it’s too late” to start investing more strategically. A professional investment advisor – especially one that’s commission-free, a.k.a. non-conflicted advice – can help you with your investment strategies at any life stage. Start where you are, and don’t look back.


Family Investment Center has developed a culture of quality for our clients. We approach each individual situation for what it is – meaning every client gets a personalized approach to wealth management. Contact us today and find out what makes us unique enough to be interviewed by publications including the Wall Street Journal, Forbes and U.S. News and World Report.

 

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