How Do The Mega Rich Invest?
Money For the Rest of Us
J. David Stein
4.5 • 1.4K Ratings
🗓️ 30 May 2018
⏱️ 32 minutes
🧾️ Download transcript
Summary
#207 Why the mega rich don't have magical investing powers, but there are some investing attributes they possess that we can emulate. More information, including show notes, can be found here.
Episode Summary
A new listener of Money For the Rest of Us inspired the question for this episode: how do the mega rich invest? Forbes reports that there are 585 billionaires in the US and most of them utilize a family office/professional management structure. But do they have some magical, secret way of making more money than the general population? Do they become exponentially richer by allocating their money in certain ways? These questions and more are explored on this episode, and it’s one not to be missed.
What are the major differences in how the mega-rich invest?
While the mega-rich, also known as ultra-high net worth individuals, don’t have any secret ways of making exponentially more money than the rest of us, they do invest in different ways. The biggest difference in investment strategies falls within the area of alternative investments such as venture capital, private real estate, energy investments, hedge funds, etc. Ultra-high net worth individuals invest as much as 46% of their portfolios in these areas, which is significantly more than many other investors. The mega-rich also hold more cash, combatting the illiquidity of their alternative investment strategies. These strategies are available to all investors but are more easily accessible to people with more funds at their disposal.
Don’t be fooled, mega-rich investors DO make mistakes
Even though the mega-rich invest in slightly different ways than typical investors, they are liable to make the same mistakes as everyone else. Many ultra high net worth individuals have fallen under the allure of hedge funds, but have generally been disappointed with performance. For example, a study CEM Benchmarking found hedge funds overall have been underperforming customized benchmarks with similar volatility at a rate of 1.3% annually, and they have been since 2000. Returns have also been especially disappointing in the long-short equity space.
Do mega rich investors achieve the same rate of return as typical investors?
Ultra-high net worth investors DO receive the same rate of return as other investors, however, they benefit from compounding. It’s simple math. If you’re able to put more money into a certain type of account that compounds in a beneficial way, you’ll come out on top faster than those who cannot invest as much.
See Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.
Transcript
Click on a timestamp to play from that location
| 0:00.0 | Welcome to Money for the rest of us. This is a personal finance show. It's on money. How it works, how to invest it, and how to live without worrying about it. |
| 0:09.0 | I'm your host, David Stein. Today is episode 2007. It's titled, How Do the Mega Rich Invest? |
| 0:17.0 | I got an email last week from Gabe. He's a new listener to the show and well here's what he writes. I just started listening |
| 0:26.6 | to money for the rest of us. I found it very enlightening and educational and I plan to leave |
| 0:31.8 | a review on Apple Podcasts soon. |
| 0:35.0 | After listening to about a dozen episodes, I have a few questions I hope you could |
| 0:41.0 | answer or perhaps do a podcast on. I've scanned through the |
| 0:45.3 | complete list of episodes and didn't see any names that seem like they would |
| 0:49.6 | answer the following. So he sent me three questions, two of which I'll probably do an |
| 0:54.8 | episode on, they're a very perceptive question, but here's the first. Well the |
| 0:59.0 | third I just gave him the answer because it wasn't enough for a full episode he asked why would a company |
| 1:05.2 | Go public in terms of the stock market as opposed to staying private |
| 1:10.6 | But here's the question I want to cover today. It says he writes, how do the mega-rich, like the |
| 1:16.1 | Trump family, for instance, make money through investments? Do they invest in the same ways middle class people do, the kind of ways you discuss on your |
| 1:27.0 | podcast, or do they make and hold their money in other ways? I wonder whether they try to make the same rate of |
| 1:34.9 | return as middle-class people do. I also tend to think of very rich people as |
| 1:39.7 | becoming exponentially richer, not by doing more work per se, but by allocating their money in certain ways. |
| 1:49.4 | Is that inaccurate? |
| 1:51.9 | So I wrote game back and just to get sort of more context of a situation and |
| 1:58.2 | it was so fascinating about it is I get emails all the time and I don't I just there an email address and a name |
| 2:06.5 | I don't really know who it is and well it turns out Gabe actually edited my |
| 2:12.3 | articles that I would write for a local newspaper and he knows |
... |
Please login to see the full transcript.
Disclaimer: The podcast and artwork embedded on this page are from J. David Stein, and are the property of its owner and not affiliated with or endorsed by Tapesearch.
Generated transcripts are the property of J. David Stein and are distributed freely under the Fair Use doctrine. Transcripts generated by Tapesearch are not guaranteed to be accurate.
Copyright © Tapesearch 2026.