Thinking about investing properly? Avoid these mistakes!

Ultra-high-net-worth individuals (UHNWIs), also known as the ultra-wealthy, are those who have a net worth of at least $30 million. Their wealth is typically composed of shares in private and public companies, real estate, and personal investments such as art, airplanes, and cars. Many people with lower net worths may believe that the secret to achieving ultra-wealth lies in some special investment strategy, but this is often not the case. Instead, UHNWIs understand the principles of making their money work for them and are skilled at taking calculated risks.

One of the most important rules of investing is not to lose money. UHNWIs do not possess any mystical investing secrets, rather they know what common investing mistakes to avoid. These mistakes are often common knowledge, even among non-wealthy investors.

Instead of only looking at developed countries such as the United States and those in the European Union, UHNWIs also consider frontier and emerging markets for investment opportunities. Some of the top countries that the ultra-wealthy are investing in include Indonesia, Chile, and Singapore. However, individual investors should conduct thorough research on emerging markets and determine if they align with their investment portfolios and overall investment strategies.

When people think about investing and investment strategies, stocks and bonds typically come to mind. But this does not mean that these types of investments are always the best option. Instead, UHNWIs understand the value of physical assets, and they allocate their money accordingly. Ultra-wealthy individuals invest in physical assets such as private and commercial real estate, land, gold, and even artwork. Real estate is a popular asset class in their portfolios because it can balance out the volatility of stocks.

While investing in physical assets is important, they may be intimidating for smaller investors due to their lack of liquidity and high investment price point. However, according to the ultra-wealthy, ownership in illiquid assets, especially ones that are not correlated to the market, is beneficial to any investment portfolio. These assets are less susceptible to market fluctuations and pay off over the long term.

UHNWIs understand that real wealth is generated in the private markets, rather than the public or common markets. They often gain a significant portion of their initial wealth from private businesses, either through business ownership or as an angel investor in private equity. Additionally, prestigious endowments such as those at Yale and Stanford, use private equity investments to generate high returns and diversify their funds.

Many smaller investors tend to follow what their peers are doing and try to match or beat their investment strategies. However, avoiding this type of competition is crucial for building personal wealth. The ultra-wealthy recognizes this and establishes personal investment goals and long-term investment strategies before making investment decisions.

They envision where they want to be in 10 years, 20 years, and beyond, and adhere to an investment strategy that will get them there. Instead of trying to keep up with the competition or becoming fearful of economic downturns, they stay committed to their plan.

What is more, the ultra-wealthy are skilled at not comparing their wealth to others. This is a common trap that many non-wealthy individuals fall into. Some people resist the urge to buy luxury items such as a Lexus, just because others are buying one. Instead, they invest their money to compound their returns and reach a desired level of wealth. So, it’s easier to use the money to purchase luxury items. Did you know that financial literacy is a significant problem in America? However, it's essential to understand the practice of rebalancing your finances. Through consistent thinking, investors can ensure their portfolios are adequately diversified and proportionally allocated. But many investors do not keep up with rebalancing, allowing their portfolios to become imbalanced.

If experts insist on rebalancing, it’s because this is essential for the ultra-wealthy, who undertake this task on a regular basis, whether it be monthly, weekly, or even daily. For those who do not have the time or resources to rebalance their portfolios, investment firms offer the option to set rebalancing parameters based on asset prices.

Investing is crucial for becoming ultra-wealthy, but many people neglect the importance of a savings strategy. The best is to understand that a financial plan is a dual strategy, involving investing wisely and saving wisely. As a result, you need to focus on increasing your cash inflows while reducing cash outflows. Sure, this may be unexpected, but with little guidance, you will learn how you can achieve your desired level of wealth in a shorter period of time.