The 2008 financial crisis was a wake-up call for anyone with money in the stock market. The crash took off nearly 40% of the S&P 500’s value and everyone who had most of their money in stocks or mutual funds took a major hit to their finances. It would be years before indexes rose again to match what had been lost that year.
The shakeup became a pivotal moment for high net worth investors and anyone who wasn’t content to watch their wealth disappear in the blink of an eye like that. Knowing that economies are cyclical, and the next market crash is always waiting around the corner, savvy investors started looking for alternative assets.
Although prone to their own cycles and speculative bubbles, these had to be assets that operated differently than the stock market. They needed to be relative safe havens, and most importantly, they preserved or rose in value when stock markets did poorly. These assets helped risk management strategies. Even if they would not post the highest returns compared to equities, they would have to be better at preserving wealth. When you’re already wealthy, losing principle is a bigger risk than the opportunity cost of missing out on growth.
Where did these wealthy investors start putting their money?
#1 Real Estate
The financialization of housing has proven to be a big problem for big cities with skyrocketing real estate prices and increasingly unaffordable rents. But for wealthy investors, in particular, those looking for international markets, real estate has become one of the assets of choice.
The incredible push to invest in hot markets like San Francisco, New York City, Vancouver, and Toronto, much of it coming from Asian wealth seeking overseas security, has irrevocably changed real estate. Once upon a time, it was rare for housing to go up much faster than inflation. Now homes have become valuable stores of wealth and speculative assets.
Investors looking for an easier alternative asset to buy than real estate (there is a lot of paperwork), gold proves invaluable. Throughout the 2000s, gold experienced a major bull market that provided huge returns to investors. Previously the domain of old money and gold bulls, bullish prices brought gold into the mainstream.
There are several forms in which to buy gold, including bars, coins, and rounds. You can learn how you can buy gold online fairly easily and reduce your costs to purchase by doing your research.
#3 Rare Coins
Another way to invest in metal is buying rare coins, usually either silver or gold. Rare or numismatic coins differ from pure bullion in that they are worth more due their condition, rarity, and desirability. With bullion, you’re buying the metal itself and it doesn’t take much more than knowing spot prices and market trends. When you get into numismatics, you have to do your research into the collectors’ market to make smart decisions.
Real estate, gold, and rare coins are some of the ways wealthy investors preserve their riches. There are others, such as fine art, but these are the most common and easily traded alternatives.
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