Forbes did an article some time back that shared the asset allocation of super-high-net-worth individuals. That means we’re not looking at someone with a measly $10 million to spare but someone with a $200,000,000 investment portfolio.
So here’s what someone who has the GDP of a small island nation in their back pocket would invest their money:
At first glance, it’s easy to tell that 44% of their assets are in equity (global equity, US equity, private equity, and venture capital). 18% of the portfolio is allocated to hedge funds (which could also invest in equity), 17% to bonds, 6% to real estate, and the rest making up the difference.
Of course, it is not possible for the average man-in-the-street to invest exactly like the super-rich. You probably wouldn’t have the same opportunities in venture capital, private equity and direct investments for example.
But even then, it’s clear as daylight that equity is the asset of choice for the super-rich to park their money. According to research done by Russell Investments, equity has given the highest returns for investors when compared to bonds, commodities, and cash.
Source: Russell Investments
So what does the pie chart and the research tell you?
It’s quite clear, isn’t it? That if you want to grow your wealth, allocating the majority of your assets in equity is almost certainly the way to go. Just like the super-rich.