Knowing how to invest has been essential for those who today amass a good fortune. This is the case both for those who have inherited it, which is estimated at 54% of the rich in Spain, and for those who have earned it by investing, around 19%, according to data from a study by the Peterson Institute for International Economics ( PIIE). So where do the richest keep their wealth?
Diversification and interest in the global market are some of its criteria. The way of investing differs from that of other mortals thanks to the happiness of having their needs covered and being able to focus on leaving enough money for their descendants. In addition, they can focus on beating inflation, spending and taxes, depending on Borja Duran, CEO and CEO of Wealth Solutions. Although the rich have the purchasing power to indulge themselves, they also take care to keep savings that allow them to continue increasing their assets. The vast majority keep 7% of their capital in cash and money market instruments, such as corporate notes, in order to be able to face unforeseen events and compensate for market declines.
The environment of low rates in recent years has favored that, in general, investors “have assumed a little more risk in their portfolios than they had in previous years,” according to sources at Banco Santander. This has translated in recent months into a drop in investment in fixed income due to its “almost zero” profits and an increase in exposure to shares, according to John Verdaguer, territorial director in Catalonia of Mirabaud. Likewise, variable income is a majority option among millionaires. In this way, they can participate in one or dozens of companies without the need to be part of the business activity. Specifically, equities account for approximately 33% of the investments of the highest incomes, according to data from Wealth Solutions. The favorite sectors of the youngest are technologies and ‘start-ups’, “because they have always lived with them and have generated wealth in these sectors”, he adds Verdaguer. More mature investors prefer pharmaceuticals, energy or finance. And they also have in mind “megatrends” such as robotics or hydrogen, according to Federico Servetto, director of private banking client strategy at Banco Sabadell. Those who decide to invest in ‘private equity’ -companies that are not listed on the stock exchange- must contribute between approximately 50,000 and 350,000 euros and will obtain the profitability for leaving their money there in 10 or 15 years.
Traditionally, the real estate sector, or ‘real estate’, has been one of the most common investments in Spain, especially of the most ‘senior’. Billionaires acquire apartments for rent, as well as offices, shopping malls, industrial buildings and data centers. In the short term they get the rental income, while in the long term they achieve a revaluation. Although they do not stop there, they also invest in infrastructure such as roads, highways, hospitals, railways or ski resorts.
Raw materials account for a part of these investments, albeit a small one. “With the increase in inflation and the disruptions in value chains aggravated by the war in Ukraine, interest in ‘commodities’ has increased a lot,” he explains. Martha Raga, Director of Discretionary Portfolio Management at Singular Bank. Even so, they still do not have a relevant role in investors’ portfolios.
“By having more assets, you can diversify more, incorporating less traditional investments and, on some occasions, giving up their liquidity,” according to CaixaBank sources. A select group of wealthy even have vintage cars, art, or vintage musical instruments as a haven for their money. On the other hand, there are investments that started out as somewhat exotic and have become a trend, such as cannabis, the metaverse, crypto assets or biodiversity. “There is also a lot of interest in productive rural farms, which not only allow their exploitation, but are also valued for their sustainability and low emissions,” he adds. servant. Cryptocurrencies have created 19 billionaires in the world, according to Forbes, but it has also diminished the capital of many. Its speculative nature means that it does not take a large part of the investments of high net worth individuals. With all the alternatives, the rich expect their capital to appreciate between 5% and 8% on average per year, something that is difficult for most to achieve.