When you think of where the ultra-wealthy put their money, you might picture portfolios heavy in stocks, maybe some bonds and a splash of luxury assets like art or rare cars. But in reality, the top asset for many high-net-worth individuals (HNWIs) isn’t stocks. Instead, real estate dominates, making up a substantial chunk of their wealth.
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Why the Wealthy Favor Real Estate
For the ultra-wealthy, real estate isn’t just another investment; it’s the foundation of their portfolio. Real estate is a “real asset” with long-term growth potential that doesn’t fluctuate as wildly as the stock market. This stability makes it especially attractive in uncertain times. According to Knight Frank, ultra-wealthy investors (those with $30 million or more in net worth) allocate about 32% of their wealth to residential properties and around 21% to commercial real estate. Altogether, that’s more than half of their assets in real estate.
These investors often own multiple properties in prime locations around the world. These aren’t just trophy assets, either. Many properties are “investments of passion,” offering personal enjoyment and financial appreciation. Imagine a beach villa that appreciates and doubles as a luxurious retreat. This dual-purpose nature – lifestyle and investment – adds depth that stocks or bonds can’t match.
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Real Estate vs. Other Investments
So, where does this leave traditional assets like stocks and bonds? While stocks remain significant, they tend to make up less of ultra-wealthy portfolios than real estate. Stocks offer growth, but the wealthy are selective, often favoring large stakes in top companies, private equity or venture capital over risky ventures. On average, stocks account for about 26% of ultra-wealthy portfolios. For them, stocks are a growth tool, not the primary “wealth builder.”
Bonds, meanwhile, have become less appealing due to their low returns in recent years. Bonds typically comprise about 10% of ultra-wealthy portfolios, especially in today’s fluctuating interest rate environment. Instead, high-net-worth investors are increasingly drawn to alternative investments, like private equity, venture capital and luxury assets like art and collectibles. These alternatives help hedge against stock market volatility and inflation.
