Business
The Methods That Made The Wealthiest Americans Mega-Rich
It’s the American dream to be incredibly affluent, while owning a lush home accompanied with a super-fast sports car.
To some, though, this dream is an everyday reality.
How did they make their wealth happen?
Let’s take a look at the ways these very rich Americans reached this desirable goal.
The Wealth and Worth survey
The survey studied the traits and behaviors of up to 700 rich Americans, which was spread across all generations, and who had a minimum of $3 million in assets.
The most shocking revelation was that three-quarters of those surveyed came from lower or middle-class backgrounds.
There can be many reasons for this:
- Coming from a no money background, the investors will appreciate the value of money and be motivated to work hard for it.
- People from poorer backgrounds will see the importance of saving and making future financial goals.
- As they worked hard from mediocre jobs, they’ll be experienced in working long hours.
- Discipline and values being shaped by close family.
The survey also found that the most common methods for getting rich were mostly through work income, making investments, or setting up a business/becoming an entrepreneur.
Here’s a pie chart showing the traditional ways in which wealth was earned:
This clearly shows those who inherited their wealth was only a sliver in comparison to earned income and investments.
However, the survey did also find that those with very elaborate portfolios, did take a long time to get there.
Their strategy was ‘long-term-buy-and-hold’ with stocks and bonds, and many professed that it was consistent small wins, rather than making big investment risks.
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Here’s another pie chart portraying the most popular methods:
Graph analysis
That’s a majority 80% of wealthy Americans who started small and made their way up, in a slow and steady pace over many long years.
This trend shows they were determined and not willing to give up on their dreams – which takes a strong character to keep that amount of patience.
All of the 80% also said that funding present needs and wants were less important than long-term goals.
What about the financial crisis?
Many critics will point out that buy-and-hold investment method doesn't work, especially to the losses made in 2008-09, or even the internet bubble burst back in 2K – giving them the opportunity to cite those who went bust from mistimed moves.
However, the study conducted found that 60% of affluent investors kept over 10% of their cash assets, while 1 in 5 confessed of a money position for over 25%.
Heilmann says:
“It is favored by many that having money protection is crucial when fighting against volatility – and it’s the perfect haven to help them through more turbulent times. But the top reason for having all that money is to be a player for jumping on a trend or going down on a dip.”
Behavior analysis
The most common tactic was the conservative outlook – they diversified their portfolios, and took a small risk here and there.
This is far more efficient in the long-term than jumping in and out on different markets looking for a wage packet.
However, this approach may seem more boring and less Wolf of Wall Street.
How do the wealthy invest?
They always invest for the long-term, even though it may be wrong in the short-term.
- They never give up on the plan.
- They spread the money out over traditional asset categories.
- Risks are kept to the minimal.
The wealthy investors were less inclined to adopt alternative investment strategies, which promote themselves as keeping growth constant in all conditions – methods that are found to achieve much less.
Getting rich slowly involves higher scrutiny with disciplined planning, ensuring the asset is age-appropriate, regular rebalancing and other mundane tasks.
Another trait that the survey found:
There was a huge portion of affluent investors who had a generous outlook on life and believed in giving something back e.g. donating money and time to charities.
Here are the figures; 74% made donations towards not-for-profit organizations, 61% volunteered skills, time or service, and 47% served on a board.
Overall
The rich made their money through long-term goal setting and placing enormous self-discipline upon themselves.
Heilmann pointed out that shrewd investors don’t need to make the process complicated, as its only latching on to the good companies who pay decent dividends – so holding on a long-term basis is still the most preferred choice for many.
Conclusion
Slow and steady isn’t what anyone talks about, or the media glamorizes, but it does seem to be what works – going by the words Heilmann said.
So while we may not be like Leo in a pin – stripe suit, it is far more realistic in the real world to stretch the goal posts further down the road and aim for a luxurious retirement instead.
