High net worth investors v average retail investors

Exodi

Type_45 said:

MK62 said:

Type_45 said:

MK62 said:

The thing is, all this is armageddon talk......for a well diversified equities portfolio to fall to zero, as Linton said, would mean a total collapse of the world as we know it......no more companies, no supermarkets to buy anything in, nothing for them to sell even if they did still exist as there'd be no companies left to make anything for them to sell......
Individual companies will rise and fall, some will disappear......nobody would argue otherwise..... that's why you don't invest in just one or two companies.
Incidentally, a US investor who bought gold in 1980, would, on an inflation adjusted basis, still be waiting for it to go back up today, 42 years later. A UK investor would have fared better, but this would have been mostly down to GBP v USD, rather than gold itself......

I don't agree with the premise of your argument.  That being that a collapsed stock market means Armageddon.  

Investors may want to portray it as such to scare everyone into keeping the gravy train going so that they can personally profit from it.  But in reality the only Armageddon would be investors' portfolios.  

If you're talking about what impact a collapsed bond market would have, that's a whole other conversation.  The bond market is 20x bigger than the stock market.

The equity "stock market" has never fallen to zero.....for it to do so would indeed mean financial armageddon......all companies would have become worthless....and as long as companies are trading and making any money, or have the potential to make money, they will never be worthless.....the shares may crash of course....maybe even 80 or 90%, but if they all become worthless, it's game over.
incidentally, if a company is worthless, how would it pay it's bondholders, as by definition if it has any money, it's not worthless.....

I'm not interested in labouring over whether stocks go to zero, -90% or -80%.

The point of the interview I posted remains:  retail investors are taking those risks with the majority of their investable money.  The wealthy are not.

This smokescreen about how "if my portfolio goes to zero (or close to it) we're all going to be eating roadkill and fending off roaming gangs" is nonsense.

I just want to be clear to those looking at these hypotheticals that correlation =/= causation.

HNW individuals are not wealthy because they are making low-risk investments, they are making low-risk investments because they are wealthy.

The vast majority of HNW invididuals did not gain their wealth from their investments.

InvesterJones

Type_45 said:

High net worth investment strategy v retail investors....

High net worth investing (the top 10 percent of investors):
- Invest in assets which go up in value and have a residual value (residual value means cannot go to zero)
- Invest in their own businesses, their own real estate, and rental properties
- They own a lot of bonds due to the guaranteed payments coming back from them plus their money back so there's no risk
- They only have 20% of their money in equities.  That's the only risk part of their portfolio

The average retail investor:
- 80% equities

So you're saying that as and when we become a high net worth individual we should switch to assets/bonds, and until then we should be more in equities?

Also, what is the difference between investing in their own business, and equities?

Prism

Type_45 said:

Prism said:

Bill Gates is a good example of a HNW individual - net worth around $130bn

Real estate - $166m 
Cars - $650k
Art - $130m

Cascade - $30bn - mostly equities
Bill and Melinda Gates Foundation - $50bn - charity
Microsoft stock - $26bn
Other stuff - $19bn - this bit is vague, but could be cash.

Still looks like a high equity exposure to me and very little in real estate, cars and art

Bill Gates is also the largest owner of farmland in America.  

We don't know what he owns.  That breakdown of his assets isn't worth a fig.

We know that a tiny proportion of his net worth is invested in some farmland (its through that Cascade bit above). We know that an even smaller amount is real estate, shares and cars.

The other 99% is invested in companies, either through shares like the rest of us retail investors (Bill Gates is a retail investor btw), through ownership or through bonds that those companies issue.

Type_45

Exodi said:

Type_45 said:

MK62 said:

Type_45 said:

MK62 said:

The thing is, all this is armageddon talk......for a well diversified equities portfolio to fall to zero, as Linton said, would mean a total collapse of the world as we know it......no more companies, no supermarkets to buy anything in, nothing for them to sell even if they did still exist as there'd be no companies left to make anything for them to sell......
Individual companies will rise and fall, some will disappear......nobody would argue otherwise..... that's why you don't invest in just one or two companies.
Incidentally, a US investor who bought gold in 1980, would, on an inflation adjusted basis, still be waiting for it to go back up today, 42 years later. A UK investor would have fared better, but this would have been mostly down to GBP v USD, rather than gold itself......

I don't agree with the premise of your argument.  That being that a collapsed stock market means Armageddon.  

Investors may want to portray it as such to scare everyone into keeping the gravy train going so that they can personally profit from it.  But in reality the only Armageddon would be investors' portfolios.  

If you're talking about what impact a collapsed bond market would have, that's a whole other conversation.  The bond market is 20x bigger than the stock market.

The equity "stock market" has never fallen to zero.....for it to do so would indeed mean financial armageddon......all companies would have become worthless....and as long as companies are trading and making any money, or have the potential to make money, they will never be worthless.....the shares may crash of course....maybe even 80 or 90%, but if they all become worthless, it's game over.
incidentally, if a company is worthless, how would it pay it's bondholders, as by definition if it has any money, it's not worthless.....

I'm not interested in labouring over whether stocks go to zero, -90% or -80%.

The point of the interview I posted remains:  retail investors are taking those risks with the majority of their investable money.  The wealthy are not.

This smokescreen about how "if my portfolio goes to zero (or close to it) we're all going to be eating roadkill and fending off roaming gangs" is nonsense.

I just want to be clear to those looking at these hypotheticals that correlation =/= causation.

HNW individuals are not wealthy because they are making low-risk investments, they are making low-risk investments because they are wealthy.

The vast majority of HNW invididuals did not gain their wealth from their investments.

I'd wager their low-risk investments have massively outperformed your portfolio YTD.

Exodi

Type_45 said:

Exodi said:

Type_45 said:

MK62 said:

Type_45 said:

MK62 said:

The thing is, all this is armageddon talk......for a well diversified equities portfolio to fall to zero, as Linton said, would mean a total collapse of the world as we know it......no more companies, no supermarkets to buy anything in, nothing for them to sell even if they did still exist as there'd be no companies left to make anything for them to sell......
Individual companies will rise and fall, some will disappear......nobody would argue otherwise..... that's why you don't invest in just one or two companies.
Incidentally, a US investor who bought gold in 1980, would, on an inflation adjusted basis, still be waiting for it to go back up today, 42 years later. A UK investor would have fared better, but this would have been mostly down to GBP v USD, rather than gold itself......

I don't agree with the premise of your argument.  That being that a collapsed stock market means Armageddon.  

Investors may want to portray it as such to scare everyone into keeping the gravy train going so that they can personally profit from it.  But in reality the only Armageddon would be investors' portfolios.  

If you're talking about what impact a collapsed bond market would have, that's a whole other conversation.  The bond market is 20x bigger than the stock market.

The equity "stock market" has never fallen to zero.....for it to do so would indeed mean financial armageddon......all companies would have become worthless....and as long as companies are trading and making any money, or have the potential to make money, they will never be worthless.....the shares may crash of course....maybe even 80 or 90%, but if they all become worthless, it's game over.
incidentally, if a company is worthless, how would it pay it's bondholders, as by definition if it has any money, it's not worthless.....

I'm not interested in labouring over whether stocks go to zero, -90% or -80%.

The point of the interview I posted remains:  retail investors are taking those risks with the majority of their investable money.  The wealthy are not.

This smokescreen about how "if my portfolio goes to zero (or close to it) we're all going to be eating roadkill and fending off roaming gangs" is nonsense.

I just want to be clear to those looking at these hypotheticals that correlation =/= causation.

HNW individuals are not wealthy because they are making low-risk investments, they are making low-risk investments because they are wealthy.

The vast majority of HNW invididuals did not gain their wealth from their investments.

I'd wager their low-risk investments have massively outperformed your portfolio YTD.

*yawn*, this was a lazy response, even for you. Yes, if if you isolate a very specific period of negative growth and compared it to a portfolio specifically intended to reduce the impact of periods of negative growth, they've probably done better. I'm sure if you were also to compare returns for the two previous years to theirs, they've probably done worse. It's kind of odd to try and cherry pick figures to try to support your point when most people on this forum are well versed in the markets.

Since you've mentioned it twice now, my personal portfolio is down -1.8% YTD, which I think is really good compared to most. Granted, I was quite lucky with the timing of a large fund swap and I also hold no bonds.

But I won't compare it to yours as from your posts in other threads, you seem count money you deposit as portfolio growth. E.g. if I had £100 in my portfolio at the start of the year, and I deposited £100, I'd have achieved 100% return...

Type_45 said:

Another strong day for my portfolio.  Having finished +8.2% in the month of September, just 3 days into October I'm 2.4% up.  These figures include new money added to my biggest asset allocation:  cash.

In that case I'm at infinity % return on my HL S&S ISA, as I opened that this year. If you don't also have infinity growth, then sorry, you can't talk to me.

I must thank you for bringing some humour to the board though, even if it is likely you're trolling.

GazzaBloom

Who cares how much wealth another person has? I prefer to focus on the peace and prosperity of my own family rather than looking over the fence fretting about someone else's wealth.

cricidmuslibale

GazzaBloom said:

Who cares how much wealth another person has? I prefer to focus on the peace and prosperity of my own family rather than looking over the fence fretting about someone else's wealth.

Very well said! I couldn’t agree more! (The horrendous news from Ukraine today ought to put a lot of the nonsense contained in this thread, most of it from one particular poster to be fair, into proper, sobering perspective!)

Type_45

Exodi said:

Type_45 said:

Exodi said:

Type_45 said:

MK62 said:

Type_45 said:

MK62 said:

The thing is, all this is armageddon talk......for a well diversified equities portfolio to fall to zero, as Linton said, would mean a total collapse of the world as we know it......no more companies, no supermarkets to buy anything in, nothing for them to sell even if they did still exist as there'd be no companies left to make anything for them to sell......
Individual companies will rise and fall, some will disappear......nobody would argue otherwise..... that's why you don't invest in just one or two companies.
Incidentally, a US investor who bought gold in 1980, would, on an inflation adjusted basis, still be waiting for it to go back up today, 42 years later. A UK investor would have fared better, but this would have been mostly down to GBP v USD, rather than gold itself......

I don't agree with the premise of your argument.  That being that a collapsed stock market means Armageddon.  

Investors may want to portray it as such to scare everyone into keeping the gravy train going so that they can personally profit from it.  But in reality the only Armageddon would be investors' portfolios.  

If you're talking about what impact a collapsed bond market would have, that's a whole other conversation.  The bond market is 20x bigger than the stock market.

The equity "stock market" has never fallen to zero.....for it to do so would indeed mean financial armageddon......all companies would have become worthless....and as long as companies are trading and making any money, or have the potential to make money, they will never be worthless.....the shares may crash of course....maybe even 80 or 90%, but if they all become worthless, it's game over.
incidentally, if a company is worthless, how would it pay it's bondholders, as by definition if it has any money, it's not worthless.....

I'm not interested in labouring over whether stocks go to zero, -90% or -80%.

The point of the interview I posted remains:  retail investors are taking those risks with the majority of their investable money.  The wealthy are not.

This smokescreen about how "if my portfolio goes to zero (or close to it) we're all going to be eating roadkill and fending off roaming gangs" is nonsense.

I just want to be clear to those looking at these hypotheticals that correlation =/= causation.

HNW individuals are not wealthy because they are making low-risk investments, they are making low-risk investments because they are wealthy.

The vast majority of HNW invididuals did not gain their wealth from their investments.

I'd wager their low-risk investments have massively outperformed your portfolio YTD.

*yawn*, this was a lazy response, even for you. Yes, if if you isolate a very specific period of negative growth and compared it to a portfolio specifically intended to reduce the impact of periods of negative growth, they've probably done better. I'm sure if you were also to compare returns for the two previous years to theirs, they've probably done worse. It's kind of odd to try and cherry pick figures to try to support your point when most people on this forum are well versed in the markets.

Since you've mentioned it twice now, my personal portfolio is down -1.8% YTD, which I think is really good compared to most. Granted, I was quite lucky with the timing of a large fund swap and I also hold no bonds.

But I won't compare it to yours as from your posts in other threads, you seem count money you deposit as portfolio growth. E.g. if I had £100 in my portfolio at the start of the year, and I deposited £100, I'd have achieved 100% return...

Type_45 said:

Another strong day for my portfolio.  Having finished +8.2% in the month of September, just 3 days into October I'm 2.4% up.  These figures include new money added to my biggest asset allocation:  cash.

In that case I'm at infinity % return on my HL S&S ISA, as I opened that this year. If you don't also have infinity growth, then sorry, you can't talk to me.

I must thank you for bringing some humour to the board though, even if it is likely you're trolling.

That was a long-winded way of admitting that gold has outperformed you by 14% YTD.

Linton

Type_45 said:

Linton said:

Type_45 said:

MK62 said:

Type_45 said:

coyrls said:

Type_45 said:

eskbanker said:

Even if there was any validity in those wild sweeping generalisations about what different types of investors are assumed to buy, the fundamental question would remain: so what?

The "so what" is explained toward the end of the video.  "If you want to be wealthy, invest as the wealthy invest".

Why?  Did they invest that way before they were wealthy or after?  Before they were wealthy they would have been in the 80% who invest differently or were they perhaps born wealthy?  In which case the advice should be to be born wealthy.

Take from it whatever you want.  What I took from it is:  What the wealthy invest in can never go to zero.  What the average retail investor invests in CAN go to zero.


This, I feel, is why the transfer of wealth from bottom to top keeps happening.

Investing in something which "can never go to zero" is not the same as risk free.....unless you are claiming that these assets cannot fall in value either.......
Also, investing in bonds does not necessarily mean getting your money back........and it's certainly not risk free.....especially when you also factor inflation in.

It kind of is.  Real estate, precious metals etc will never go to zero.  And if their value drops you just hold on to it and it will go back up again.  It's as risk-free as it gets.  

Why not?  If no-one wants them they have no value.

Do you know what shares are?  Companies are owned by their shareholders.  The only way a company's shares could be of zero value would be if the company had no assets and was not able to make a profit which implies the company would either be nationalised or cease to exist.

Are you really forecasting a world where no private sector businesses exist?  In such a world where would wealth come from? How will the rich become richer if all they can do is to trade gold and land between themselves?

The stock market is not the same thing as the real economy.  If the stock market crashes it doesn't mean there are no shops or private businesses.  It simply means the stock market has crashed.

A stock market is very much tied to the real world since what is being bought and sold is fractions of the total ownership of companies whose shares are quoted on the stock market.  If you have a broadly based investmnent you probably own a part of Microsoft, Amazon, Shell etc etc. You are positing a world in which the ownership of all major companies across the world becomes worthless.  

MK62

Type_45 said:

MK62 said:

Type_45 said:

coyrls said:

Type_45 said:

eskbanker said:

Even if there was any validity in those wild sweeping generalisations about what different types of investors are assumed to buy, the fundamental question would remain: so what?

The "so what" is explained toward the end of the video.  "If you want to be wealthy, invest as the wealthy invest".

Why?  Did they invest that way before they were wealthy or after?  Before they were wealthy they would have been in the 80% who invest differently or were they perhaps born wealthy?  In which case the advice should be to be born wealthy.

Take from it whatever you want.  What I took from it is:  What the wealthy invest in can never go to zero.  What the average retail investor invests in CAN go to zero.


This, I feel, is why the transfer of wealth from bottom to top keeps happening.

Investing in something which "can never go to zero" is not the same as risk free.....unless you are claiming that these assets cannot fall in value either.......
Also, investing in bonds does not necessarily mean getting your money back........and it's certainly not risk free.....especially when you also factor inflation in.

Real estate, precious metals etc will never go to zero.  And if their value drops you just hold on to it and it will go back up again. 

Can you explain why you think you can't do that with equities, but can do it with real estate and precious metals?

Incidentally, most major equity markets have at least a few companies who deal in.........real estate and precious metals (you need to join the dots here... )