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As we move into the New Year, unsurprisingly, what worries many people is a topic that consumed the second half of 2021: soaring inflation.
For the ultra-rich, rising inflation actually plays a big role in how they choose to invest as the new year approaches.
âAs all investors should be, the ultra-rich are concerned about inflation and are looking to preserve their assets in 2022,â said Michael Sonnenfeldt, president and founder of TIGER 21, a peer-to-peer learning network for investors and entrepreneurs with a personal net worth of $ 10 billion to $ 1 billion.
While the ordinary investor certainly doesn’t have millions under his belt, there may be ways to copy the way the rich allocate their money, especially amid the lingering inflation fears that plague us all. Here’s how the ultra-wealthy members of TIGER 21 are investing by 2022.
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1) Build inflation-resistant portfolios
The members of TIGER 21 are convinced that inflationary pressures will be permanent, not transient. In fact, 65% of members expect inflation to accelerate over the next year.
So they allocate money to some of their favorite investments for protect against inflation, such as:
- Real estate, such as industrial properties and apartment buildings
- Public stocks, or stocks, in platform companies with pricing power (platform companies are those like Amazon, Apple, and Airbnb), consumer staples, and streaming services
- Cryptocurrencies (more information on this in n Â° 2 below)
When you think of real estate as an example of investing to hedge against inflation, it’s not just an asset for the rich. Beyond home ownership, real estate investments can be made through REITs (also known as real estate investment trusts). A REIT is a company that invests in different types of income-producing real estate (shopping malls, condominiums, housing estates, hospitals, parking garages, etc.). You can buy shares of the REIT in order to gain exposure to its real estate investments and make that real estate part of your investment portfolio without actually managing the property yourself.
You can invest in publicly traded REITs through any brokerage account, like loyalty, TD Ameritrade and Robin Hood, while companies like Fund raising, Yield Street and Increase the money allow you to buy unlisted REIT shares on your own through their platforms.
2) Double their crypto investments
As an alternative to investing in gold to fight inflation, TIGER members doubled their investment in cryptocurrencies.
TIGER 21 members place their money specifically in Ethereum (34%), bitcoin (33%), a crypto fund (23%), other coins (15%), and dogecoin (2%).
These wealthy investors are certainly not wrong. Bitcoin is often described as “digital gold” and should theoretically hedge against inflation due to the limited supply, but it is not yet clear whether it will be a good hedge against inflation in the long run.
Of course, everyday investors can also invest in crypto through financial apps that make it easier. App Cash, a peer-to-peer payment service owned by Square Inc., allows users to purchase bitcoin only. Pay Pal allows users to buy four different cryptocurrencies: bitcoin, ethereum, bitcoin cash, and litecoin. Users with crypto on PayPal can then use it to pay on the app as well.
Robin Hood, the mobile app for investing in stocks, supports seven cryptocurrencies for user purchase, including the popular dogecoin meme cryptocurrency. And personal finance provider, SoFi, allows crypto purchases of 21 different crypto coins and tokens through its app. If you want more control over your crypto and own it directly, Coinbase offers a platform to buy, sell, trade, store and send over 50 types of cryptocurrency.
3) Increase investments in alternative energies
Electric vehicle stocks remain hot investments, and the ultra-rich are spending more money on companies like Tesla, Rivian, and Lucid.
Tesla stock doesn’t come cheap, but you can still expose yourself to the EV market by putting your money in. ETFs that invest in a variety of companies related to electric vehicles, such as the ETF Global X Autonomous & Electric Vehicles (NASDAQ: DRIV) or iShares Self-Driving EV and Tech ETF (NYSEMKT: IDRV). This is a broader and less risky investment approach than buying individual stocks.
At the end of the line
It’s interesting how the ultra-rich are investing on the dawn of a new year with rising inflation in mind. Because it is a concern for every investor, it is helpful to take notes on what they are doing to protect against inflation.
The lesson here is that you don’t need to rack up extra millions to protect your money in the market.
Editorial note: Any opinions, analysis, criticism or recommendations expressed in this article are the sole responsibility of the editorial staff of Select and have not been reviewed, endorsed or otherwise approved by any third party.