Yahoo Finance I’m a Multimillionaire — 5 Places I Won’t Invest My Money
Multimillionaires didn’t get rich by being sloppy or cavalier with investing their money.
The wealthy pay close attention to where they invest. And if they don’t, then they often don’t stay wealthy for long.
Take a word of caution from those who have been playing and winning this game for a while. Watch out for these investments that multimillionaires avoid.
Also here are three ways a multimillionaire maintains their financial status.
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Cryptocurrencies
“As a multimillionaire, I’ve learned to be very selective about where I invest my money and one area I steer clear of is cryptocurrencies,” said Brian Meiggs, founder of Smarts. “Despite the buzz about their high returns, the market is incredibly volatile and unpredictable.
“Most cryptocurrencies don’t have the regulatory oversight that traditional investments do, which adds a layer of risk,” he said. “Their value can swing dramatically based on market sentiment and speculative trading rather than any real, intrinsic value.
“This unpredictability makes them a risky choice, especially for those of us focused on preserving wealth over the long term. I prefer to invest in more stable, well-regulated markets that provide consistent returns and lower risk.”
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Speculative Assets
Investing involves an analysis of fundamentals, such as the revenue of a company or property, its debts, market demand for it and so on.
Speculating doesn’t involve fundamentals — it requires something to change if it is to earn a return.
“Wealthy individuals tend to shy away from overly speculative investments,” said Paul Chow, co-founder of Design Dynamics. “Their focus is on stability and long-term growth. This might involve a mix of stocks, bonds and other assets that offer a balance of risk and potential return.”
Chris Gleason, founder and CEO of Simplicite Tax Loans and RAM Financial Group, expands on that distinction. “Multi-millionaires understand the difference between ‘investing’ and ‘speculation.’ They avoid any investment where the value of the deal doesn’t exceed the price from the moment they buy it. In other words, they only invest in opportunities where they can quantify the expected outcome from the start.
“Investors recognize value and try to take positions that represent a discount to that value,” he said. “This provides a positive return (even if it’s on paper) right away.
“Speculators take positions that they think or hope will increase in value in the future.”
Investments They Don’t Understand
Investment advisor Saundra Curry and her husband Sidney founded BC Holdings of TN, where they work with wealthy clients.
“Multimillionaires typically steer clear of investments with unclear fundamentals. To manage the inherent risks of investing, they focus on thoroughly understanding opportunities before committing their resources. This focus allows them to make informed and confident decisions to protect and grow their wealth,” she said.
“In other words, they rarely invest in securities they don’t understand. From our 30 years of experience, they don’t invest in securities that offer unreasonably high returns. They strive to earn high returns, but understand the market well enough to identify red flags.”
Investments They Can’t Control
“My multi-millionaire clients are currently avoiding the stock and bond markets entirely,” Gleason said. “With the prices of those investments having risen so drastically over recent years, they see no inherent value there.
“Multi-millionaires avoid almost all of the investment opportunities that are generally hand-fed to the public: stocks, mutual funds, bond funds, etc. They’re looking at private opportunities with a measurable value — if there’s value, they’ll look at it.”
Jeff Sekinger, fintech entrepreneur and CEO at Nurp algorithmic trading, said “Educated self-made millionaires invest their money into things they can control. Typically millionaires become millionaires because they invested time, energy and money into themselves to develop skills that were valuable to the marketplace.
“Through business they accumulated their wealth and continued to invest back into personal growth to acquire more skills and back into their businesses to sustain more growth. Millionaires avoid investing in things they do not control.
“Investing in things that are out of your control will slow your growth, distract you from the most important and profitable investments (your business and you personally) and give you a sense of disempowerment because of the lack of control on the ultimate success of that investment,” he said.
Investments That Struggle To Pace Inflation
Sekinger said that it’s hard to build wealth if your investments lose money or barely keep pace with inflation.
“Millionaires also avoid investing in slow-growth investments that do not outpace inflation. Examples include bonds, CD’s and a lot of mutual funds with high expense ratios,” he said. “Young millionaires under the age of 40 typically accept risk but they make sure the risk is calculated and the investment has credibility behind it.
“If they are making private investments, they avoid investments that are not audited by a third party and are not run by a team with many years of successful experience,” he said.
Choose Investments Wisely
You don’t need to be a millionaire to invest like one. Choose investments with strong fundamentals. When in doubt, opt for diversification, such as an index fund that mirrors the S&P 500.
If you invest in speculative assets that you don’t understand and have no control over, prepare for a rocky road ahead.
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This article originally appeared on GOBankingRates.com: I’m a Multimillionaire — 5 Places I Won’t Invest My Money
