Gold is often touted as a favorite investment of the ultra-rich, but is it really a significant part of their portfolios? And what motivates these wealthy individuals to include gold in their investment strategy?
Gold in Rich Investors’ Portfolios
According to real estate consultancy Knight Frank, the average ultra-high net worth individual (UHNWI) with a net worth over $30 million does hold some gold in their portfolio. However, this allocation typically amounts to around 2% of their net worth. Interestingly, wealthy investors tend to allocate more of their wealth to “investments of passion” like fine art, wine, and cars, compared to gold.
Why Investors Buy Gold in the First Place
Investors often view gold as a defensive asset that provides protection against risks such as inflation, currency devaluation, and geopolitical uncertainty. It is perceived as a safe-haven asset during times of economic turmoil.
While gold doesn’t generate income, new platforms like Monetary Metals are emerging to enable investors to earn income from gold through lending.
What Do the Wealthy Invest in More than Gold?
The wealthy allocate a substantial portion of their net worth to real estate, both residential and commercial properties. Directly owned commercial properties, commercial real estate funds, real estate investment trusts (REITs), and private equity are favored investment choices. Equities and bonds also feature prominently in the portfolios of the ultra-rich.
Given that gold primarily serves as a defensive hedge for unexpected crises rather than a wealth-building strategy, it is evident that the wealthy prioritize other asset classes for wealth accumulation.
Final Thoughts
While owning a small amount of gold can offer peace of mind during uncertain times, it is essential to understand that gold alone may not lead to significant wealth accumulation. Consider including gold in your portfolio as a defensive measure against market volatility and as a way to diversify your investments.
Additional Insight: Diversification is key for any investor, including the ultra-wealthy. By spreading their investments across various asset classes, wealthy individuals can mitigate risk and optimize returns over the long term.
It’s crucial to strike a balance between defensive assets like gold and growth-oriented assets to ensure a well-rounded investment strategy.
