How The Rich Invest

Whenever a poor person or to be politically correct a non-wealthy person starts to whinge about how rich people get rich, I often get my back up. That’s because being rich or wealthy is no different than being poor or destitute. You have to work at it. Poor doesn’t just happen, you have to DO certain things or NOT DO certain things to become and STAY poor.

Let me give you an example from an email I received – from an investment advisor (to the rich and wealthy)…

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Good morning,

When you are next at a dinner party and the conversation slows, ask your fellow diners what is the all-time closing high of the Dow Jones Industrial Average?

The answer is 14,164, hit on the 9th of October 2007.

To keep the conversation going, then ask them what percentage the Dow is current below that record closing high and then what percentage it is above its Global Financial Crisis (GFC) low.

The answer is -10.2% and +93%.

I believe most people who aren’t as close to equity markets as the readers of these notes would be stunned to know the Dow is only -10% below its all-time high and +93% above its GFC low.

I realise there is a big business in the scaring the hell out of uneducated investors, but I believe over the short, medium and long term all those who have capitulated from equities to less volatile, yet grossly overpriced “safe” asset classes, will regret it in an absolute and real return sense.

I have seen others describe the switch from equities to other “less volatile” asset classes as “asset allocation”. That’s a very convenient way of describing what is a classic capitulation, but particularly by those approaching retirement who believe they are protecting their lifestyle expectations.

However, at the end of the day all investors must do what they are comfortable with. I have no issue with that and perhaps my relative youth leads me to be far more risk tolerant and volatility tolerant than my investment strategy writing peers.

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Interesting perspective isn’t it?

I’ve been advocating alternative investments to create wealth and abundance for years – with a contrarian approach that is endorsed by none other than Warren Buffett.

Of course the poor person might shout as loud as he/she can that it’s the perspective of a BILLIONAIRE… But how does one BECOME a billionaire?

Hmmm… Something to think about.

I just wanted to share this with you because when it’s all said and done, if you do what everyone else does, you get the same results they do – AVERAGE RETURNS.

To get BETTER results, you have to think differently. It’s what I call antimimeticisomorphism.

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