Many people investing for the future—be it for retirement or to leave a legacy for their children—often look to the big-money folks to pick up tips on how to make their own investments lead to a greater net worth.
Though there may be differences in incomes between the haves and not-quite-haves—including how much each can afford to squirrel away each month—the basic goal remains the same: Maximize your earnings.
Known in financial circles as "high-net-worth clients," these folks really are no different than the rest of us, though they typically are defined as having a net worth of at least $1 million.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
How did they get to, and stay, where they are? Here are some common traits of high-net-worth clients:
They are very good savers—in fact, robust savers.
They don't fall into the trap of "keeping up with the Joneses" in today's high-consumption economy. This isn't easy to do, but it's absolutely key if you want to build and keep wealth, and not fritter it away. "Budget" is sometimes seen as a negative word, but spending plans are something that can be used advantageously, no matter what your net worth is.
They don't put everything in the public markets.
Studies have shown that these families begin to move away from traditional mutual funds and into more individual investments as their net worth increases. They also use private equity, real estate investment trusts, annuities and other alternative investments.
They develop and stick with a detailed plan that will help them reach their unique goals.
High-net-worth investors typically have a clear idea of their strategy, something that seems to be elusive for lower-end investors. The high-enders have figured out who they are and what they have to do to reach their goal. That, actually, is not a new idea.
In 1750, Benjamin Franklin said: "There are three things extremely hard: steel, a diamond, and to know oneself."
And in the world of investing, knowing yourself and recognizing that you are different from every other investor can be the difference between success and failure.
For example, you have a risk tolerance that's unique to you. You also have specific goals for five, 10, 15 years down the road and beyond. High-net-worth individuals refuse to be derailed by changes in the economy, job changes, life changes or whatever lies in wait out there. Investing with less than an 18- to 24-month timeframe and constantly watching the ups and downs of the market can lead to bad decisions and results in the frantic and flawed "buy-high-sell-low" effect.
They work with financial professionals.
A trusted adviser can steer you away from investments that don't match your risk tolerance and serve as a reminder of the ultimate goals of the strategy. Most high-net-worth families rely on the advice of a trusted financial adviser for a myriad of life's decisions—whether it's something as small as buying a car or as substantial as deciding when to retire and how to best start drawing income.
My experience has been that, no matter the net worth of a client, they all need the same things: a customized financial strategy, good investment direction and comprehensive planning in taxes, estate, charitable giving, legacy creation and so on.
See? You aren't so different after all.
Joe Berry is an Investment Adviser Representative with the Semmax Financial Group in North Carolina. He is a licensed insurance agent in both property/casualty and life and also has passed his Series 65 securities exam. Berry recently completed the Series 3 securities exam to become qualified as a commodity trading adviser.
Advisory services offered through Semmax Financial Advisors Inc., a Registered Investment Adviser. Registration does not imply any particular level of skill. Insurance products and services offered through Semmax Inc. Tax services offered through Semmax Tax Inc.
This material is for informational purposes only. It is not intended to provide any investment advice or provide the basis for any financial decisions. Please consult a qualified professional before making decisions about your financial situation.
Keith Morelli contributed to this article.
-
The $33,000 Retirement: One Man's Surprising Path to Financial Freedom at 61Forget what society tells you, even with less than $1 million, you can be happy in retirement.
-
The Best Aerospace and Defense ETFs to BuyThe best aerospace and defense ETFs can help investors capitalize on higher government defense spending or hedge against the potential of a large-scale conflict.
-
Roth IRA Conversions in the Summer? Why Now May Be the Sweet SpotConverting now would enable you to spread a possible tax hit over more than one payment while reducing future taxes.
-
A Financial Expert's Three Steps to Becoming Debt-Free (Even in This Economy)If debt has you spiraling, now is the time to take a few common-sense steps to help knock it down and get it under control.
-
I'm an Insurance Expert: This Is How Your Insurance Protects You While You're on VacationHere are three key things to consider about your insurance (auto, property and health) when traveling within the U.S., including coverage for rental cars, personal belongings and medical emergencies.
-
Investing Professionals Agree: Discipline Beats Drama Right NowBig portfolio adjustments can do more harm than good. Financial experts suggest making thoughtful, strategic moves that fit your long-term goals.
-
'Doing Something' Because of Volatility Can Hurt You: Portfolio Manager Recommends Doing This InsteadYes, it's hard, but if you tune out the siren song of high-flying sectors, resist acting on impulse and focus on your goals, you and your portfolio could be much better off.
-
Social Security's First Beneficiary Lived to Be 100: Will You?Ida May Fuller, Social Security's first beneficiary, retired in 1939 and died in 1975. Today, we should all be planning for a retirement that's as long as Ida's.
-
An Investment Strategist Demystifies Direct Indexing: Is It for You?You've heard of mutual funds and ETFs, but direct indexing may be a new concept ... one that could offer greater flexibility and possible tax savings.
-
Q2 2025 Post-Mortem: Rebound, Risks and Generational ShiftsAs the third quarter gets underway, here are some takeaways from the market's second-quarter performance to consider as you make investment decisions.
