Instead of buying stocks like older generations, young, rich Americans are putting their money into things like digital money, real estate and fine art. Reports show that people ages 21 to 42 with at least $3 million are looking for new ways to grow their wealth, making them different from both older rich people and those their age who aren't as wealthy.
Goldman Sachs says: Portfolio(s) with a slice of real assets [like art] performed even better than the 60/40 over the long run.
Young millionaires are sitting on a hefty pile of cash, making up about a third of their total assets. The rationale? According to a Capgemini Consulting report, 17% say they're keeping their powder dry for the right investment opportunities, while another 31% are securing their ideal lifestyle, from lavish vacations to fine dining. While this mentality may be foreign to millennials grappling with debt and bills, both groups share a common goal: building a cushion to protect against uncertainties and seizing new opportunities.
These young, affluent investors are making sure not to put all their eggs in one basket. They're spreading out their investments to include a wide range of assets. While traditional wealth managers handle some of their portfolios, a significant 40% of their assets go into less conventional avenues.
One of these is real estate, which isn't just a property acquisition. Real estate is an ongoing source of income through rentals. Rental income provides a financial cushion that is not directly linked to their primary means of making money, adding another layer of financial security.
They are also delving into the high-value fine art market using platforms such as Masterworks. This service enables people to purchase shares in artwork created by famous artists like Jean-Michel Basquiat, Pablo Picasso and Banksy. As a result, individuals can become partial owners of costly art pieces, an investment often seen as stable and less prone to market ups and downs. The appeal of investing in art isn't solely its visual beauty; historically, it has acted as a stable asset relatively insulated from the unpredictability common in traditional markets.
Investing in what's known as blue-chip art — works by artists with long histories of high demand and strong market performance — can offer returns that are difficult to achieve with more conventional investment options. For example, over the past 26 years, the appreciation in the price of art has outpaced the S&P 500 by 131%. This points to art not just as a form of aesthetic enjoyment but as a serious financial asset that can yield impressive gains over time.
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Adding a layer to their investment strategy, these younger millionaires consult their social circles and online resources for financial advice rather than relying solely on professional advisers. It seems that the investment strategy of this affluent young cohort is not merely focused on wealth accumulation but is also tied to their values. Social impact investments are gaining traction, as seen in the high percentage of young investors aiming to allocate money toward causes they care about, such as climate change.
This shift in investment strategies among young, wealthy Americans doesn't just mark a generational difference in financial management — it also provides valuable insights for those aspiring to build their own fortunes. From keeping ample cash reserves to diversifying into unconventional assets, the younger-than-40 millionaire club is rewriting the rule book on how to accumulate, manage and grow wealth.
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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