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.
From just $107.88 $24.99 for Kiplinger Personal Finance
Be a smarter, better informed investor.
Sign up for Kiplinger’s Free 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.
-
Dismal August Jobs Report Offers Rate-Cut Relief: What the Experts Are SayingThe August jobs report came in much lower than expected, lifting the odds that several rate cuts will come through by year's end.
-
Ask the Editor — Tax Questions on the SALT DeductionAsk the Editor In this week's Ask the Editor Q&A, we answer questions from readers on the OBBB's changes to the SALT deduction.
-
Greed, Fear and Market Volatility: A Financial Adviser's Guide to Keeping Emotions Out of Investment DecisionsDon't panic! And don't be so confident in the stock market that you overlook risk. Instead, be logical. Your retirement security could depend on it.
-
Want a Financial Adviser Who Shares Your Faith? Look for One With a CKA DesignationFinancial professionals with a Certified Kingdom Advisor certification are committed to integrating biblical principles with sound financial advice.
-
10 Ways to Stay Safe From Grandparent Scams and Other Fraud, Courtesy of a Financial PlannerScams are increasingly hard to detect, and anyone can be fooled, from older people to educated professionals. Here are 10 ways to avoid becoming a victim.
-
This Is How the Student Loan Bubble Is Primed to Pop, From a Student Funding ExpertFueled by easy money, inflated tuition and high default rates, the student loan bubble mirrors the 2008 subprime mortgage crisis. We could be headed for a potential financial collapse. What can we do?
-
More Than Money: The Hidden Toll of Financial Abuse of Older AdultsFinancial abuse from schemes involving tech support, government impostors, false sweepstakes, grandchild hoaxes and online shopping issues can cause thousands of dollars in losses.
-
I'm a Financial Planner: Here Are Three High-Impact Ways to Make a Difference With Your DollarsThe world often feels out of control, but here are three ways to use your money — through investments, charitable giving and political donations — to help create a more just and sustainable future.
-
The Unsung Hero of Aisle 5: A Tale of Forgotten Change and Compassion at the SupermarketThis supermarket manager went above and beyond to help when a child forgot her change at the checkout counter. You might be surprised at some of the complications that supermarkets face when it comes to customers' forgotten change.
-
Train, Integrate, Retain: A Strategic Playbook for Adviser OnboardingsBuild a thriving practice by training new advisers with clear goals, structured processes and consistent mentorship for strong team growth.
