Monday, May 23, 2016

10 common traits of the wealthy


“Perceptions of the wealthy in history and popular culture have been painted with a broad brush that doesn’t reflect the majority of financially successful people in society,” said Keith Banks, president of U.S. Trust. “The insights we’ve gained through extensive research over the years give us a more accurate portrait of the modern day wealthy. It’s an increasingly diverse group of men and women of all ages and backgrounds. Their advantage in life is not rare financial privilege but rather basic values, discipline and sense of potential shaped by family from an early age, which equipped them to make the most of every opportunity.”

They built wealth over time: 77 percent of those surveyed came from middle class or lower backgrounds, including 19 percent who grew up poor. They earned wealth over time, most of it through income from work and investing.

Basic, long-term approach to investing: 86 percent of HNW investors made their biggest investment gains through long-term buy and hold strategies, traditional stocks and bonds (89 percent) and a series of small wins (83 percent) versus taking big investment risks. Their use of more sophisticated investments grows as their wealth increases.

Invest in valuable tangible assets: 48 percent of HNW investors invest in tangible assets, such as farmland, investment real estate and timber properties that can produce income and grow over time with legacy value. One in five collects fine art, including one in three ultra high net worth art collectors who are now using art as an alternative asset class and a core part of their wealth structuring and philanthropic giving strategies.

Disciplined savers, opportunistic buyers: 81 percent of HNW investors say that investing to reach long-term goals is more important than funding current wants and needs. This disciplined approach to saving and investing was instilled at an early age and becomes easier with the financial freedom that wealth affords.

These are the principles that I lay out in my "How To Be Rich"series. The principles really are not hard. What is hard is making yourself do it and controlling your impulses to spend. Notice that the wealthy are mainly from the lower and middle income backgrounds. They were disciplined savers and invested prudently in income producing assets over the long term. They let their investments compound over time. Not hard but as I pointed out yesterday if 66% of the people in US can't scrounge up $500 for a car repair they can forget about being wealthy.

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