Observing how other people make decisions can be a great way to improve areas of your life where you have limited experience — and investing is no exception. Personally, it took me a while to learn that owning stocks isn’t just for rich people. I grew up thinking only wealthy people invested their money, and it took a while to overcome that thinking.
If you need some of your money assumptions challenged or are just looking for a few tips on how to invest your money better, here are three strategies used by the wealthy you may want to consider.
Owning a home (or two) is where many wealthy people have their money tied up. According to a recent wealth report from the real estate consultancy company Knight Frank, 32% of high-net-worth individuals’ (worth $1 million or more) wealth is allocated to their primary and secondary homes.
That’s been a savvy move over the past few years, as the average selling price of a home has soared 29% over the past three years, according to the U.S. Census Bureau. Not only do home prices tend to go up over time, but they’re also a historically safe place to put your money compared to more volatile investments.
The second-most popular place where wealthy people put their money is into stocks. If you took all of the investable wealth that high-net-worth individuals have, 26% of it goes into owning equities, according to Knight Frank.
Investing in stocks can be a great way to build wealth, thanks to the power of compounding interest. For example, let’s say you invest $1,000 into the stock market and add $100 every month for 20 years. Assuming an average rate of return of 8%, you would have $59,575 on just $25,000 worth of contributions at the end of two decades.
READ MORE: How Does Compound Interest Work?
The good news is that it’s easier than ever to own stocks, thanks to some great investing platforms. Many investing apps also allow you to trade stocks for free, making it an inexpensive investment method.
Another top investment strategy among the wealthy is to own commercial property directly. This may involve owning industrial, retail, office, or multifamily properties.
Like any type of investment, this one can be risky, so make sure to do your research before considering investing in a commercial property. For example, office property values haven’t fared well nationally since the pandemic, but they may be doing well in your local area.
If you’re looking for the easiest way to follow what wealthy investors are doing, opening a brokerage account and buying stocks is likely your best bet.
For one thing, you can get started without a lot of capital. Some investing platforms will allow you to buy fractional shares of a stock, making it easier than ever to put a few hundred dollars toward your favorite stock. In contrast, buying a home or investing in commercial real estate often involves a significant capital investment.
Additionally, you don’t need to spend much time learning about individual stocks if you don’t want to. Buying an index fund allows you to buy a basket of stocks that span many sectors. Index funds are a relatively low-risk way to invest, keep you well-diversified, and typically have low expense ratios, which are the management fees you pay to the brokerage.
Finally, it’s worth noting that if you’ve never bought stocks, it can feel scary to put your hard-earned money into an account. So, remember, it’s OK to start small. Many index funds don’t have an investment minimum, so start with just $50 if you want. Taking the first step will teach you a little bit about investing without having to put too much money toward your first investment.
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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.Chris Neiger has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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