March 22, 2016

Rich People Have Half Their Money In Real Estate and Cash

I'm not certain what the common perception of the assets of the wealthy are but I'd think that ownership of stocks is a big part of it.    I think of business ownership as a lot of it.   When you look at the list of richest people in the US you've got Bill Gates, Warren Buffet, the Walton family (Walmart heirs), etc.     Those people own businesses or stock in businesses.  

But on average most of the wealthy in the world aren't heavily invested in stocks or businesses.   Most of the wealthy ($30M+) have their money in real estate and cash as much as anything else.    Bloomberg ran the article Ranks of World's Wealthiest Thin Most Since the Financial Crisis in which we find a pie chart showing the asset mix of the wealthiest.

Half of their money is in :
Primary Residence and second homes = 24%
Real Estate = 11%
Cash = 15%

The other half :
Financial investments = 28%
Personal business 19%
collectibles and precious metal 3%

I'm surprised to see such a high amount in cash at 15%.   Personal housing is also very high at 24%.

I'm not saying its good or bad.   I kind of think its telling that the really rich people have so much in cash and their own housing.    For people that rich to have so much tied up in their own homes doesn't seem so smart.   If you've got $100M and own $25M worth of houses.   That seems like a lot of house.  But then I suppose housing isn't a BAD investment generally.   It usually at least keeps up with inflation (with rare exception like 2007).  

The amount of cash that the wealthy have is also pretty surprising.    If you've got $50M do you really need $7.5M cash balance?     That seems awfully high.    Maybe its a indication the rich are more conservative with their finances.    It could also be skewed by the international mix of the people they looked at.  Maybe if you live in China or France or Brazil then having cash is the smarter way to go.


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