So do the uber wealthy invest money the same way we do?

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Re: So do the uber wealthy invest money the same way we do?

Post by TradingPlaces » Fri Aug 07, 2015 12:37 am

ralph124cf wrote: Large purchases are frequently single pay purchases. I don't actually know the prices, but perhaps a 65 year old billionaire with ten grandchildren takes out $100M policies for each of them. Perhaps each of these single pay policies costs $35M. This removes $350M from the taxable estate, at a tax savings of 40%, so a tax savings of $140M at death, and passing $1B to the grandchildren at a cost of ($350M-$140M= $210M) to the estate.
I seriously, highly doubt that. There are much better ways to shelter money from taxes than life insurance.

Of course, life insurance industry would love you to believe that it is the best way to shelter money.
It is not.

Rich people did not get rich overnight, and they setup structures much more sophisticated so that:

- they don't pay overhead to life insurance companies,
- the circumstances under which kids get the money are much more controlled than death,
- they are not subject to insurance companies credit risk.

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Re: So do the uber wealthy invest money the same way we do?

Post by TradingPlaces » Fri Aug 07, 2015 12:41 am

astrohip wrote: The wealthy are just like you and me. Just with more money. 8-)
This absolutely not correct.

Have you seen Mitt Romney's tax forms? There are 100s of pages long.

Wealthy people have complicated financial circumstances:
- physical assets,
- financial structures,
- assets that are offshore,
- assets that are in trusts,
- assets that are private,
- assets that they can not easily sell,
- various forms of partnerships (have you seen a complicated K-1 form?).

I guarantee you that a typical $100M+ person who got their by running businesses has a significantly more complicated asset, finance, investment, and tax situation than a typical, W-2 receiving, two-asset portfolio bogle head.

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Re: So do the uber wealthy invest money the same way we do?

Post by TradingPlaces » Fri Aug 07, 2015 12:43 am

KyleAAA wrote:Probably not, because most billionaires don't know any more about investing than your average Jane/Joe. They just pay people to handle it. But who knows, some might.
This is absolutely not true, as most billionaries come from the finance industry.

And the remaining learn how to invest, maybe not in a traditional sense.

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Re: So do the uber wealthy invest money the same way we do?

Post by TradingPlaces » Fri Aug 07, 2015 12:46 am

DireWolf wrote:The super wealthy can be 100% cash and still not be able to spend it all in their lifetime.

If you still want some ROI and are willing to take some risk... 25% stocks/25% bonds/25% real estate/25% cash would seem reasonable.
Most superwealthy do not have free cash. At all.

Zuck sold shares in the IPO to cover taxes. So he did not have that money. He had to sell $2B worth of FB shares to cover federal and california taxes.

The liquid assets that most single-company founders have is tiny. And those who have made it that rich, like 30 years ago, are selling stock like crazy.

There are very few single-company billionaires that are diversified. Buffett with BRK comes to mind. And that's it.

Even Gates is highly undiversified, even though he has been dumping MSFT like crazy. And his buddy Allen dumped a lot of Microsoft and is every kind of business from fishing rods, to professional sports teams, to restaurants to god knows what else.

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Re: So do the uber wealthy invest money the same way we do?

Post by JoMoney » Fri Aug 07, 2015 1:18 am

TradingPlaces wrote:...most billionaries come from the finance industry...
Scrolling through the Forbes list, http://www.forbes.com/billionaires/list/
That doesn't seem to be true. Many of them are entrepreneurs in non-finance businesses, quite a few got their money the old fashioned way ...they inherited it
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Re: So do the uber wealthy invest money the same way we do?

Post by SpaceCowboy » Fri Aug 07, 2015 6:44 am

From the people I know and those that manage their mega portfolios (>$100mm), many of them invest in muni bonds to the extent necessary to live off the interest. This is a very popular strategy, and is another version defining when enough is enough. The rest they put into more esoteric vehicles like PE, hedge funds, VC, real estate, etc. Very few use pure index funds. Some have their advisors replicate index funds which provides better TLH. Don't think I know a single DIY at that asset level. They also hire good trust & estate lawyers and other experts to minimize taxes.

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Re: So do the uber wealthy invest money the same way we do?

Post by KyleAAA » Fri Aug 07, 2015 10:17 am

TradingPlaces wrote:
KyleAAA wrote:Probably not, because most billionaires don't know any more about investing than your average Jane/Joe. They just pay people to handle it. But who knows, some might.
This is absolutely not true, as most billionaries come from the finance industry.

And the remaining learn how to invest, maybe not in a traditional sense.
Out of the top 100 billionaires listed in Forbes only a handful came from finance.

None of the billionaires I personally know are all that more advanced than your average Joe, at least. They just don't care to bother with it.

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Re: So do the uber wealthy invest money the same way we do?

Post by magneto » Fri Aug 07, 2015 11:13 am

DireWolf wrote:The super wealthy can be 100% cash and still not be able to spend it all in their lifetime.

If you still want some ROI and are willing to take some risk... 25% stocks/25% bonds/25% real estate/25% cash would seem reasonable.
+1

The simple 'don't know portfolio', which would be a good starting place for many investors who concede they have no 'edge'.
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Re: So do the uber wealthy invest money the same way we do?

Post by Maynard F. Speer » Fri Aug 07, 2015 11:20 am

Keeping it all in cash won't do much for your legacy - and certainly won't ensure your offspring's offspring have much left - and won't protect you from some worst-case-scenarios

Image

So the first thing you'll probably want to do is spread the risk a little further and wider - then you might be thinking about keeping up with inflation, and minimising tax ... So keeping hold of a big pile of money isn't necessarily all that easy
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Re: So do the uber wealthy invest money the same way we do?

Post by Johno » Fri Aug 07, 2015 2:03 pm

techcrium wrote:Say someone has several billion dollars.

Do they invest it the same way as regular boglehead and buy a Vanguard ETFs?
They generally don't because most billionaires made the billions in non-diversified business efforts. They built a business, which whether you like it and think it's 'socially useful' or not, includes hedge fund billionaires, along with builders of firms like Schwab, IB, Ameritrade etc. but even so as mentioned financial industry billionaires aren't a large proportion of billionaires. And even when they 'made it the old fashioned way' by inheritance, for really big fortunes it's generally just a generation ago, so the family orientation still tends to be entrepreneurship, more often than not, rather than passive investing.

How *could* billionaires passively invest differently than BH's if their main experience isn't in building or maintaining a self made or family business, as it usually is? That's sort of a different question. But the main difference would be that large scale of investment makes it feasible to invest with reasonable diversification and reasonably low costs in areas where individuals of ordinary means can't. For example you can't directly invest in a diversified portfolio of large apartment buildings across the country at normal investor scale, and buying REIT's isn't really the same. At billionaire scale you can, and pay people to manage it for you at reasonable cost, and likely be in a position from your experience and connections to pick good people. And on and on with all kinds of other assets which normal scale BH's might wisely avoid because they have no particular insight into selecting the right manager, nor any leverage to reduce the high costs often offered to small (or even $100k's or $1mil's scale) investors for packaged investment in other than simple public stocks/bonds.

Sticking mainly with index stock and bond funds is the right choice for the majority of investors (not necessarily the majority of $'s though). OTOH the idea that multi-millionaire or billionaire investors who don't stick to that are fools, which is sometimes posited here directly or indirectly, is an overstatement of the BH thesis.

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Re: So do the uber wealthy invest money the same way we do?

Post by Clive » Sat Aug 08, 2015 11:21 am

Maynard F. Speer wrote:Keeping it all in cash won't do much for your legacy - and certainly won't ensure your offspring's offspring have much left - and won't protect you from some worst-case-scenarios

Image

So the first thing you'll probably want to do is spread the risk a little further and wider - then you might be thinking about keeping up with inflation, and minimising tax ... So keeping hold of a big pile of money isn't necessarily all that easy
Cash and/or gold are 'reserves'. If you stuff cash into a mattress then you'll generally see it lose purchase power. Deposit into savings accounts and it will tend to retain purchase power. The price of gold broadly tends to rise with inflation over time, retaining purchase power.

'Reserves' are retained with the intention to be periodically deployed and later replenished.

Some investments broadly provide a inflation pacing value and in addition provide a means to yield a additional benefit on top. Own a home and the house price might rise with inflation and owning your own home means that you avoid having to pay rent for a roof over your head - the imputed rent is a form of dividend (in the UK house price rises combined with gross imputed rental yields have in combination exceeded stock total gains since the 1950's).

With stocks you buy into a business who deploy the assets seeking to earn a profit. The business value might broadly rise with inflation and the earnings/profits pay a dividend.

With land, the land value might broadly rise with inflation and trees grown (woodland) or dairy produce (farmland) yields a dividend.

The dividend from cash/gold 'reserves' comes from deploying/replenishing those reserves. The stock purchase power of gold varies enormously over time, so whilst in isolation gold loses stock purchase power at times that trend spikes in the opposite direction (typically when stocks have dropped a lot in price). Usually relatively quickly afterwards a reversal occurs and the stock purchase power of gold spikes. If you had one gold coin that suddenly bought 4 times as much stock as a year earlier and you deployed that gold into stocks at that time, and then a few years later stocks bought 4 times more gold than earlier and you sold stock to replenish gold reserves, then you have 16 times more gold reserves than before that cycle. If one such cycle occurs ever 50 years then that's paramount to a 5.7% annualised 'dividend'.

Timing is or course a issue. However simply equal weighting each of stocks, land and gold and periodically (not too frequently) rebalancing captures some of the same effect. Ancient Talmudic text advocated such one third in business, land and reserves. For the UK since 1953 around equal amounts of stocks, gold and home+imputed has yielded a 7.7% annualised real reward (assuming a 4% imputed rent benefit (under-estimate as average rental yields have tended to be higher)). Again for the UK such assets can be relatively tax efficient, gold legal tender is exempt from capital gains. Farmland, woodland, own primary home can all be inheritance tax or capital gain tax exempt. Stocks held till death have CGT step-up (exemption).

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Re: So do the uber wealthy invest money the same way we do?

Post by Maynard F. Speer » Sat Aug 08, 2015 11:57 am

Clive wrote:
Maynard F. Speer wrote:Keeping it all in cash won't do much for your legacy - and certainly won't ensure your offspring's offspring have much left - and won't protect you from some worst-case-scenarios

Image

So the first thing you'll probably want to do is spread the risk a little further and wider - then you might be thinking about keeping up with inflation, and minimising tax ... So keeping hold of a big pile of money isn't necessarily all that easy
Cash and/or gold are 'reserves'. If you stuff cash into a mattress then you'll generally see it lose purchase power. Deposit into savings accounts and it will tend to retain purchase power. The price of gold broadly tends to rise with inflation over time, retaining purchase power.

'Reserves' are retained with the intention to be periodically deployed and later replenished.

Some investments broadly provide a inflation pacing value and in addition provide a means to yield a additional benefit on top. Own a home and the house price might rise with inflation and owning your own home means that you avoid having to pay rent for a roof over your head - the imputed rent is a form of dividend (in the UK house price rises combined with gross imputed rental yields have in combination exceeded stock total gains since the 1950's).

With stocks you buy into a business who deploy the assets seeking to earn a profit. The business value might broadly rise with inflation and the earnings/profits pay a dividend.

With land, the land value might broadly rise with inflation and trees grown (woodland) or dairy produce (farmland) yields a dividend.

The dividend from cash/gold 'reserves' comes from deploying/replenishing those reserves. The stock purchase power of gold varies enormously over time, so whilst in isolation gold loses stock purchase power at times that trend spikes in the opposite direction (typically when stocks have dropped a lot in price). Usually relatively quickly afterwards a reversal occurs and the stock purchase power of gold spikes. If you had one gold coin that suddenly bought 4 times as much stock as a year earlier and you deployed that gold into stocks at that time, and then a few years later stocks bought 4 times more gold than earlier and you sold stock to replenish gold reserves, then you have 16 times more gold reserves than before that cycle. If one such cycle occurs ever 50 years then that's paramount to a 5.7% annualised 'dividend'.

Timing is or course a issue. However simply equal weighting each of stocks, land and gold and periodically (not too frequently) rebalancing captures some of the same effect. Ancient Talmudic text advocated such one third in business, land and reserves. For the UK since 1953 around equal amounts of stocks, gold and home+imputed has yielded a 7.7% annualised real reward (assuming a 4% imputed rent benefit (under-estimate as average rental yields have tended to be higher)). Again for the UK such assets can be relatively tax efficient, gold legal tender is exempt from capital gains. Farmland, woodland, own primary home can all be inheritance tax or capital gain tax exempt. Stocks held till death have CGT step-up (exemption).
I certainly make use of savings/current accounts rates where I can .. Moneysavingexpert's 5% savings loophole can get you 4% on up to £15-34k .. and I think of P2P lending as a cash-like asset .. But of course the problem with larger amounts of money is banks only cover £85k under FSCS

Direct exposure to commodities, however, I've never been a fan of .. As Swensen says: “pure commodity price exposure holds little interest to sensible investors, as long-term returns approximately equal inflation rates.” In other words, if you think that buying and holding a physical commodity such as gold will give you a hedge against inflation, well, you’re right. But merely keeping pace with inflation isn’t the goal of investing, growth is ... “Oil and gas reserve purchases and timber investments provide investors with commodity price exposure and an intrinsic rate of return, thereby dominating price exposure alone.”

Good article here on why Swensen, Graham and Buffett prefer to gain commodity exposure through companies mining/extracting them
http://www.financialpost.com/m/blog.htm ... &s=Opinion
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Re: So do the uber wealthy invest money the same way we do?

Post by Clive » Sat Aug 08, 2015 12:23 pm

Maynard F. Speer wrote:Direct exposure to commodities, however, I've never been a fan of .. As Swensen says: “pure commodity price exposure holds little interest to sensible investors, as long-term returns approximately equal inflation rates.

For simplicity, look at the data in this link http://news.fool.co.uk/news/investing/i ... -gold.aspx - which indicates a portfolio gain of around 11.1% annualised, which over the 37 years = near 50 gain factor. As that rebalances to hold equal amounts of the four assets each year in effect the end value amount of gold being held was 50 times more than the start date value. The price of gold however had appreciated at a 9.9% annualised rate i.e. stood at around 33 times higher than at the start. So very broadly 50/33 more actual gold being held at the end than at the start (close to 50% more gold coins/bars).

If gold broadly paced 6.6% annualised inflation (it actually exceeded that over those years), and you end up with 50% more gold at the end compared to at the start then the 'trading' (via rebalancing) was productive. i.e. a form of 'dividend'. Many however just look at gold in isolation and ignore the reserve/deployment/replenish 'dividends' - not that dissimilar to looking at just share price only and ignoring dividends.

Yes there are alternative means to hold 'reserves' and deploy/replenish those, but for the richer investor the tax breaks and option to hold physical assets offshore etc. (diversify geopolitical risk) might mean greater protection for certain types of assets compared to others (such as holding gold rather than stocks that mine/trade gold).

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Re: So do the uber wealthy invest money the same way we do?

Post by Artsdoctor » Sat Aug 08, 2015 1:10 pm

The uber-wealthy that I know usually think about generational planning. Even if you're going to give a huge chunk to charities, you're still not going to be concerned about running out. Consequently, if you desire, you can forget about fixed income altogether if you want, since there's no need to really no need except for a holding area for an upcoming purchase.

No, they are not "just like us but with more money."

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Re: So do the uber wealthy invest money the same way we do?

Post by hafius500 » Sat Aug 08, 2015 2:04 pm

UBS -
Global Ultra Wealthy Population Reaches Record High of 211,275 Individuals with Combined Net Worth of Nearly US$30 Trillion, Hong Kong/Zurich, 19 Nov 2014

The Wealth-X and UBS World Ultra Wealth Report 2014, released today, shows that...
...
The report finds that UHNW individuals have over two thirds of their wealth in their core businesses. We believe that this could expose UHNW individuals to many unintended risks and so we have been helping them address these concentration biases....
Maybe the quoted report has more information on how these people invest. I haven't read it.
You can find a link to this report at the bottom of this article or here:

Wikipedia - Ultra High Net Worth Individuals

Another review of this report states that these individuals hold a lot of (low-returning) cash on banking accounts.
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Re: So do the uber wealthy invest money the same way we do?

Post by Maynard F. Speer » Sat Aug 08, 2015 2:42 pm

Clive wrote:
Maynard F. Speer wrote:Direct exposure to commodities, however, I've never been a fan of .. As Swensen says: “pure commodity price exposure holds little interest to sensible investors, as long-term returns approximately equal inflation rates.

For simplicity, look at the data in this link http://news.fool.co.uk/news/investing/i ... -gold.aspx - which indicates a portfolio gain of around 11.1% annualised, which over the 37 years = near 50 gain factor. As that rebalances to hold equal amounts of the four assets each year in effect the end value amount of gold being held was 50 times more than the start date value. The price of gold however had appreciated at a 9.9% annualised rate i.e. stood at around 33 times higher than at the start. So very broadly 50/33 more actual gold being held at the end than at the start (close to 50% more gold coins/bars).

If gold broadly paced 6.6% annualised inflation (it actually exceeded that over those years), and you end up with 50% more gold at the end compared to at the start then the 'trading' (via rebalancing) was productive. i.e. a form of 'dividend'. Many however just look at gold in isolation and ignore the reserve/deployment/replenish 'dividends' - not that dissimilar to looking at just share price only and ignoring dividends.

Yes there are alternative means to hold 'reserves' and deploy/replenish those, but for the richer investor the tax breaks and option to hold physical assets offshore etc. (diversify geopolitical risk) might mean greater protection for certain types of assets compared to others (such as holding gold rather than stocks that mine/trade gold).


I do agree with the diversification and risk-spreading benefits .. But then over 80 years to 2005, gold's value's only increased 27-fold, against inflation's 16, and stock's 2,658-fold

Longer term it seems different commodities have come in and out of fashion as flight-to-safety assets .. Gold's demand seems very connected to culture, institutions like marriages - it feels very speculative to me ... Whereas with a hedge fund, at least you know its sole aim is to increase in value and hedge against downturns (whether it achieves it or not)
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Re: So do the uber wealthy invest money the same way we do?

Post by travellight » Sun Aug 09, 2015 1:13 pm

[quote]Most superwealthy do not have free cash. At all.

Zuck sold shares in the IPO to cover taxes. So he did not have that money. He had to sell $2B worth of FB shares to cover federal and california taxes./quote]

This surprises me... seems like they should also have a 6 month EF in liquid assets which would include likely tax liabilities.

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Re: So do the uber wealthy invest money the same way we do?

Post by travellight » Sun Aug 09, 2015 1:15 pm

"Most superwealthy do not have free cash. At all.

Zuck sold shares in the IPO to cover taxes. So he did not have that money. He had to sell $2B worth of FB shares to cover federal and california taxes."

This surprises me. I would think the uber wealthy should also have 6 months EF just like us. It just would be a much larger amount factoring in likely tax payments.

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Re: So do the uber wealthy invest money the same way we do?

Post by roflwaffle » Sun Aug 09, 2015 1:55 pm

Artsdoctor wrote:The uber-wealthy that I know usually think about generational planning. Even if you're going to give a huge chunk to charities, you're still not going to be concerned about running out. Consequently, if you desire, you can forget about fixed income altogether if you want, since there's no need to really no need except for a holding area for an upcoming purchase.

No, they are not "just like us but with more money."
I don't disagree with the gist of your post, but I do think that there are plenty of individuals who aren't uber-wealthy, but do think about generational planning.

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Re: So do the uber wealthy invest money the same way we do?

Post by Yesterdaysnews » Sun Aug 09, 2015 2:05 pm

TradingPlaces wrote: Even Gates is highly undiversified, even though he has been dumping MSFT like crazy. And his buddy Allen dumped
a lot of Microsoft and is every kind of business from fishing rods, to professional sports teams, to restaurants to god knows what else.
I had read that if Gates had just held on to his Microsoft stock he would be worth TRIPLE his current net worth.

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Re: So do the uber wealthy invest money the same way we do?

Post by HomerJ » Sun Aug 09, 2015 2:16 pm

KyleAAA wrote:
TradingPlaces wrote:
KyleAAA wrote:Probably not, because most billionaires don't know any more about investing than your average Jane/Joe. They just pay people to handle it. But who knows, some might.
This is absolutely not true, as most billionaries come from the finance industry.

And the remaining learn how to invest, maybe not in a traditional sense.
Out of the top 100 billionaires listed in Forbes only a handful came from finance.

None of the billionaires I personally know are all that more advanced than your average Joe, at least. They just don't care to bother with it.
The one $300 millionaire I personally know was convinced that inflation was going to go through the roof back in 2011, and invested millions in gold and a gold-mining company. Luckily, his own company throws off enough profits that I'm sure he's back to even by now. :)

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Re: So do the uber wealthy invest money the same way we do?

Post by yukon50 » Sun Aug 09, 2015 2:34 pm

bhsince87 wrote:My boss is worth 2-3 Billion $.

About 70% of that is in his company (privately owned), and the rest is in US Treasuries.

So I guess you could call that a 70/30 portfolio. The 70 is highly concentrated, but it's also under total control.
How do you get to work for a billionaire? What kind of work? Learn anything useful from him?

How have people on this board met so many ultra wealthy people? It's not like they would be your neighbor...

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Re: So do the uber wealthy invest money the same way we do?

Post by yukon50 » Sun Aug 09, 2015 2:40 pm

KyleAAA wrote:
TradingPlaces wrote:
KyleAAA wrote:Probably not, because most billionaires don't know any more about investing than your average Jane/Joe. They just pay people to handle it. But who knows, some might.
This is absolutely not true, as most billionaries come from the finance industry.

And the remaining learn how to invest, maybe not in a traditional sense.
Out of the top 100 billionaires listed in Forbes only a handful came from finance.

None of the billionaires I personally know are all that more advanced than your average Joe, at least. They just don't care to bother with it.
how do you personally know billionaires? just curious as I never come close to them

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Re: So do the uber wealthy invest money the same way we do?

Post by Leeraar » Sun Aug 09, 2015 4:19 pm

I know someone who is worth $50 million plus. She is not very good at investing her money, but it does not much matter.

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Re: So do the uber wealthy invest money the same way we do?

Post by travellight » Sun Aug 09, 2015 4:28 pm

I have met one just as a passing acquaintance through my son's school. She had hosted a party at her house that I attended. She is worth over 3 billion. I have no idea how she manages her money.

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Re: So do the uber wealthy invest money the same way we do?

Post by bertilak » Sun Aug 09, 2015 5:00 pm

I wish the answer was important to me!
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Re: So do the uber wealthy invest money the same way we do?

Post by paper200 » Sun Aug 09, 2015 6:00 pm

For the Uber-rich, I guess, the glass is too full to see the halfway mark let alone the bottom. So no worries. I guess even if they get to the bottom they will not know what hit them! :(
Having freedom, food and roof is being 90% lucky in life and so is index investing. So, don't let the remaining 10% bother you.

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Re: So do the uber wealthy invest money the same way we do?

Post by bertilak » Sun Aug 09, 2015 6:23 pm

paper200 wrote:For the Uber-rich, I guess, the glass is too full to see the halfway mark let alone the bottom. So no worries. I guess even if they get to the bottom they will not know what hit them! :(
I believe many of these people have seen the bottom more than once. They hit back!
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Re: So do the uber wealthy invest money the same way we do?

Post by randomguy » Sun Aug 09, 2015 7:49 pm

yukon50 wrote:
how do you personally know billionaires? just curious as I never come close to them
The 4 I have met have all been founders of companies I worked for. Granted one was only worth 200 million when I met him. Frankly the people worth 20 million were a lot flashier but a lot of that is personality. I probably just didn't notice the no flash moderately rich people as much.

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Re: So do the uber wealthy invest money the same way we do?

Post by 2tall4economy » Mon Aug 10, 2015 5:29 am

TradingPlaces wrote:
- sub $10M: focused on making the money last,
- $10-$50, you are rich, and you are concerned about passing some money to your kids,
- $50MM + up until 9 figures: keep it for generations,
- $1B plus: all about charity.
While there is certainly some wiggle room I'd argue the thresholds are much lower:

<$5M - enough to never work again, can buy anything but not everything

<$25M - enough to buy anything and everything. You'll never spend this down so you need estate planning, child management -- there is a reason banks target this level (and even $10M in some cases) for their absolute best services, because they know it too.

<$100M - here's where you get into "estate planning" type activities (tax, trust) on a daily basis vs once (at death)

$100M+ - I don't believe there is any meaningful distinction from here on up; there is nothing you can't buy or control at this level that $1B would allow. At this level you have massive complexity; I'd guess you have your hand in multiple businesses and not just in the stock market (I know I would if just for something to do with my time -- I'd wager someone with $100M wouldn't be ok taking orders from others during their "day job").

What I think is interesting as a boglehead is that, if you don't change your lifestyle and investing habits, and you get to the top of category 1 before you retire (which is not a small number of people on this board), you're very likely to get into one or two more brackets within your lifetime even if you never work again because $5M will continue to get significant capital appreciation and you've probably got another 20 years of life ahead of you, minimum.

Personally, I spend a healthy amount of time planning what my wealth looks like next year, in 5 years and in 20 years, and think about the concerns I'll have in the other brackets and have started planning for them now.
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Re: So do the uber wealthy invest money the same way we do?

Post by 2tall4economy » Mon Aug 10, 2015 5:57 am

Lots of people posting on here that they know billionaires personally; while it's certainly not impossible (in the case where their name is on the Forbes list and easily verifiable or if you see their assets due to your dealings with them) I'd guess most people who put themselves out as billionaires (or are assumed to be) really aren't.

There's only 615 in the entire USA afterall.

People lie about their wealth all the time (Trump, Rappers, etc...) and are mistaken for it as well (my father in law thinks I earn double what I actually earn; we have a semi-close relationship but don't talk money).
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Re: So do the uber wealthy invest money the same way we do?

Post by Maynard F. Speer » Mon Aug 10, 2015 6:43 am

2tall4economy wrote:$100M+ - I don't believe there is any meaningful distinction from here on up; there is nothing you can't buy or control at this level that $1B would allow. At this level you have massive complexity; I'd guess you have your hand in multiple businesses and not just in the stock market (I know I would if just for something to do with my time -- I'd wager someone with $100M wouldn't be ok taking orders from others during their "day job").
In London there is ..

We've had houses and apartments go for up to $140m in Mayfair this year .. Many Russian socialites would consider you too "working class" to date .. And you're not really at the level you could buy up attractive businesses or invest much in property

Between cars, London housing prices and holidays to Dubai, $100m could go quite quickly
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Re: So do the uber wealthy invest money the same way we do?

Post by Beliavsky » Mon Aug 10, 2015 7:11 am

techcrium wrote:Say someone has several billion dollars.

Do they invest it the same way as regular boglehead and buy a Vanguard ETFs?
I am in the investment business and know some people with net worth well in the 8 and 9 figures. Many of them do have substantial holdings in stock index funds. In addition, they have equity and other investment opportunities through their employer, they may own real assets such as farm land, and they own some investments such as master limited partnerships (which distribute K-1 forms) whose downside for small investors is the complication of their tax returns. Rich people already have complicated tax returns and accountants to deal with them. Many of them own whole life insurance, as one way to transfer wealth to heirs in a tax-advantaged manner.

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Re: So do the uber wealthy invest money the same way we do?

Post by Clive » Mon Aug 10, 2015 8:08 am

2tall4economy wrote:Lots of people posting on here that they know billionaires personally; while it's certainly not impossible (in the case where their name is on the Forbes list and easily verifiable or if you see their assets due to your dealings with them) I'd guess most people who put themselves out as billionaires (or are assumed to be) really aren't.
Some of us are non-US, me for one - and I'm a multi-billionaire (in South Korean Won) :)

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Re: So do the uber wealthy invest money the same way we do?

Post by KyleAAA » Mon Aug 10, 2015 10:22 am

yukon50 wrote:
KyleAAA wrote:
TradingPlaces wrote:
KyleAAA wrote:Probably not, because most billionaires don't know any more about investing than your average Jane/Joe. They just pay people to handle it. But who knows, some might.
This is absolutely not true, as most billionaries come from the finance industry.

And the remaining learn how to invest, maybe not in a traditional sense.
Out of the top 100 billionaires listed in Forbes only a handful came from finance.

None of the billionaires I personally know are all that more advanced than your average Joe, at least. They just don't care to bother with it.
how do you personally know billionaires? just curious as I never come close to them
Knew the son of one growing up. One was my sunday school teacher when I was a kid. Also met a few musicians who aren't billionaires but are pretty well-off. I've also met 2 former presidents (both still living, so that narrows it down). Blind luck, in other words.

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Re: So do the uber wealthy invest money the same way we do?

Post by randomguy » Mon Aug 10, 2015 10:34 am

2tall4economy wrote: $100M+ - I don't believe there is any meaningful distinction from here on up; there is nothing you can't buy or control at this level that $1B would allow. At this level you have massive complexity; I'd guess you have your hand in multiple businesses and not just in the stock market (I know I would if just for something to do with my time -- I'd wager someone with $100M wouldn't be ok taking orders from others during their "day job").

.
This just isn't true. At 100 million, you still stuck flying net jets. At a billion you can get the pj. You are probably not buying the 10 million dollar monet either. Pretty hard to justify the trip to the international space station when it is like 20% of your networth.

Heck there is even a gap between a billionaire and a 5 billionaire. One is going to struggle to buy a nba team. The other can.

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Re: So do the uber wealthy invest money the same way we do?

Post by 2tall4economy » Mon Aug 10, 2015 11:00 am

Maynard F. Speer wrote:
2tall4economy wrote:$100M+ - I don't believe there is any meaningful distinction from here on up; there is nothing you can't buy or control at this level that $1B would allow. At this level you have massive complexity; I'd guess you have your hand in multiple businesses and not just in the stock market (I know I would if just for something to do with my time -- I'd wager someone with $100M wouldn't be ok taking orders from others during their "day job").
In London there is ..

We've had houses and apartments go for up to $140m in Mayfair this year .. Many Russian socialites would consider you too "working class" to date .. And you're not really at the level you could buy up attractive businesses or invest much in property

Between cars, London housing prices and holidays to Dubai, $100m could go quite quickly
I understand your point, but some one with $100m can get the $140m house. The earnings should sufficiently pay the debt service.

Getting two of them, probably not.
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Re: So do the uber wealthy invest money the same way we do?

Post by 2tall4economy » Mon Aug 10, 2015 11:01 am

randomguy wrote:
2tall4economy wrote: $100M+ - I don't believe there is any meaningful distinction from here on up; there is nothing you can't buy or control at this level that $1B would allow. At this level you have massive complexity; I'd guess you have your hand in multiple businesses and not just in the stock market (I know I would if just for something to do with my time -- I'd wager someone with $100M wouldn't be ok taking orders from others during their "day job").

.
This just isn't true. At 100 million, you still stuck flying net jets. At a billion you can get the pj. You are probably not buying the 10 million dollar monet either. Pretty hard to justify the trip to the international space station when it is like 20% of your networth.

Heck there is even a gap between a billionaire and a 5 billionaire. One is going to struggle to buy a nba team. The other can.
Last I checked a new private jet was in the $20m or less range and opex would be about $1m/year, so well within swr:)
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Re: So do the uber wealthy invest money the same way we do?

Post by Leeraar » Mon Aug 10, 2015 11:03 am

The difference that I see is that they have "people" and will pay for service. So, they go for high-cost advisors that will preen them and suck up to them. I think that was a big part of Madoff's allure.

Hedge funds, limited partnerships, all the exclusive stuff that the hoi polloi cannot access.

I don't think their investing needs are much different, but their attitude surely is.

L.
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Re: So do the uber wealthy invest money the same way we do?

Post by randomguy » Mon Aug 10, 2015 11:32 am

2tall4economy wrote:
This just isn't true. At 100 million, you still stuck flying net jets. At a billion you can get the pj. You are probably not buying the 10 million dollar monet either. Pretty hard to justify the trip to the international space station when it is like 20% of your networth.

Heck there is even a gap between a billionaire and a 5 billionaire. One is going to struggle to buy a nba team. The other can.
Last I checked a new private jet was in the $20m or less range and opex would be about $1m/year, so well within swr:)[/quote]

Nice ones are more like 50 but let's go with 10-20 million.
That is like saying someone with 1 million bucks should buy an exotic car. Sure they can come up with the 250k up front and 20k/yr opex but it radically limits your choices in the rest of your life. For the billionaire itis more like buying a civic:)

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Re: So do the uber wealthy invest money the same way we do?

Post by bhsince87 » Mon Aug 10, 2015 9:11 pm

yukon50 wrote:
bhsince87 wrote:My boss is worth 2-3 Billion $.

About 70% of that is in his company (privately owned), and the rest is in US Treasuries.

So I guess you could call that a 70/30 portfolio. The 70 is highly concentrated, but it's also under total control.
How do you get to work for a billionaire? What kind of work? Learn anything useful from him?

How have people on this board met so many ultra wealthy people? It's not like they would be your neighbor...
I'd say it was 60% luck, 30% special skills, and 10% wisdom (on my part).

I left a job as an engineer at a $20 Billion mega corp, where I was a "star", and went to work for a $50 million privately owned company. I really liked the owner, and I thought I could make a difference.

Since then (15 years ago), we've grown to $750 million. No debt, and huge profits. My previous employer has tried to buy us several times. The last offer was around $3 billion.

And no, the owner doesn't appear on the Forbes list. I doubt he's even on their radar.

He lives in a $500k house, his kids went to public schools and state universities. He drives a Ford Expedition, wears jeans, company polo shirts, jogging sneakers, and flies Southwest when possible. If you sat beside him on a flight, you'd think he was just a pleasant fellow traveler. And you'd be right!
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Re: So do the uber wealthy invest money the same way we do?

Post by inbox788 » Tue Aug 11, 2015 2:58 pm

bhsince87 wrote:He lives in a $500k house, his kids went to public schools and state universities. He drives a Ford Expedition, wears jeans, company polo shirts, jogging sneakers, and flies Southwest when possible. If you sat beside him on a flight, you'd think he was just a pleasant fellow traveler. And you'd be right!
M̶i̶l̶l̶i̶o̶n̶a̶i̶r̶e̶ Billionaire next door!

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Re: So do the uber wealthy invest money the same way we do?

Post by JoMoney » Tue Aug 11, 2015 3:36 pm

Maybe not quite 'uber wealthy' but this article suggests a prominent political figure that's following a simple index with $5-$25M
http://www.marketwatch.com/story/hillar ... 2015-08-10
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Re: So do the uber wealthy invest money the same way we do?

Post by randomguy » Tue Aug 11, 2015 4:43 pm

JoMoney wrote:Maybe not quite 'uber wealthy' but this article suggests a prominent political figure that's following a simple index with $5-$25M
http://www.marketwatch.com/story/hillar ... 2015-08-10
Career politicians have a lot of constraints on what they can invest in. That being said I remember somewhat questionable future trades and real estate deals from this individual. Maybe wisdom comes with age:)

I think you will find uber rich run the gauntlet of investing styles from like you and me to crazy exotic. And they also do stupid things. Martha Stuart went to jail to avoid a 60k loss. That's a rounding error when yournin the 9 figure club

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Re: So do the uber wealthy invest money the same way we do?

Post by TradingPlaces » Tue Aug 25, 2015 11:50 pm

Yesterdaysnews wrote:
TradingPlaces wrote: Even Gates is highly undiversified, even though he has been dumping MSFT like crazy. And his buddy Allen dumped
a lot of Microsoft and is every kind of business from fishing rods, to professional sports teams, to restaurants to god knows what else.
I had read that if Gates had just held on to his Microsoft stock he would be worth TRIPLE his current net worth.
Well, that's the definition of a concentrated investment.

Whether it goes down to 5% of its value or triples shows a concentrated investment.

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Re: So do the uber wealthy invest money the same way we do?

Post by Tanelorn » Wed Aug 26, 2015 6:14 am

JoMoney wrote:Maybe not quite 'uber wealthy' but this article suggests a prominent political figure that's following a simple index with $5-$25M
http://www.marketwatch.com/story/hillar ... 2015-08-10
The same person has a personally controlled charity worth way more, upwards of $250M, and the assets there are largely in real estate and cash. Up to you how you want to count that towards their AA, but it seems that personal charities for the uber-rich are kinda like IRAs for me and you - tax free money you can often spend on yourself, albeit with some restrictions I'm sure your fancy lawyers can help you plan around.

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