It’s now common knowledge that the most surefire way to wealth is through smart investments. Just because you aren’t a millionaire, it doesn’t mean you shouldn’t invest like one. This doesn’t mean taking out a million-dollar loan to finance stock purchases. Rather, it means studying the investment habits and mindsets of the richest people in the world, to see what it is that they’re doing right.
The investment decisions that keep the rich in the top 1% are informed with the help of an army of financial advisors and consultants. Luckily, you don’t need to spring out for a top financial guru, as we have all the tips you’ll ever need right here. Here are the top investment strategies millionaires use to get rich.
Spread Yourself Wide and Thin
One of the most common mistakes made by keen investors is to bet big on higher risk investments offering a huge potential payout. The truth is that very few people in history have gotten rich from putting all their eggs in one basket, so you shouldn’t try. You should be risk-averse with your investments, at least at the start, but don’t be too scared of taking a few risks.
Very few millionaires ever got where they did today by leaving nothing to chance. Millionaires aren’t the big spenders many people think they are, preferring to keep their investments relatively small and as spread out as possible. Once your initial investments start to pay off, that’s the time to start dabbling in some higher risk, higher reward ventures.
Keep Your Investments Diverse
This is a continuation of the point made above. While your investments should be spread out among multiple assets, they should also be as diverse as possible. You might want to use this kick-ass chart by the financial consultants Fidelity if you’re looking for guidance on how your investments should be spread out.
Consider only putting a small percentage in stocks, with a good chunk of your capital going into long-term, stable assets such as bonds and gilt funds. You should have some amount squirrelled away into the more high-risk ventures that could pay off big time, as long as you’re comfortable with potential losses.
Always Have a Backup Plan
Millionaires very rarely part with money unless they’re confident they’ll get it back. Investments are just like betting, and smart better know that they need a failsafe to recoup their losses if things don’t go their way. Take sports betting for example; the betting comparison platform Oddschecker has broken down major offers by bet365, one of which allows players to get a full refund on their stake if your bet loses on a number of different markets.
Wealthy people often take the same approach, balancing any potential losses with gains, and insuring themselves for rainy days. It’s the exact same logic which drives the millionaire mantra; stick to the 20-20 rule. The rule states that you should invest a maximum of 20% in long-term investments, and never have more than 20% of your income or net worth tied up in your primary residence. This provides you with a solid safety net should something ever go wrong.
Be Smart with Your Taxes
The vast majority of millionaires don’t avoid their taxes at all, they just exploit existing tax laws the right way in order to maximize their returns. Rather than planning on funneling all of your money into a shady account in Bermuda, simply examine the tax laws for your country of residence and see which rules and stipulations exist for you to benefit from. Most governments provide all kinds of tax reliefs in order to promote wealth creation, and even the poorest person can benefit from them.
For example, you should always take free of government-sponsored tax-free wealth building initiatives. These include savings options such as IRAs and HSAs (Health Savings Accounts), as well as clauses that allow you to avoid or reduce capital gains taxes in a wide variety of circumstances. If you don’t the research yourself, you’ll have to accept losing a chunk of your wealth to Uncle Sam.
Stick to Secure Investments
Your primary investments should always be the most secure ones in existence, but what are these? Without a doubt, the safest investments are land and property. There are the ones that will very rarely if ever lose much of their face-value, and with the current land and property market in the US being absolutely white-hot at the moment, the chances of you making substantial returns from such investments are higher than at any other point in recent history.
Liquid assets are good, but property is your safety zone. No matter what happens in your financial life, having a sound property investment to fall back on is a boon that will encourage you to make bolder investments, safe in the knowledge that you’ll always have a plan B.
Speak to the Right People
As a final piece of advice, remember that few people ever got rich alone. Your network is everything, so never be afraid to speak to people you know to find out what they think of the current market, and what advice they might have for rookie investors such as yourself.
The right conversation with the right person could see you making some of the best financial decisions of your life, so don’t hesitate to reach out to your circle and see what they think.