The ultra-wealthy—the top 1% of investors—manage their money very differently from the average retail investor. While many everyday investors focus primarily on stocks and bonds, high-net-worth individuals (HNWIs) and family offices allocate their wealth strategically across multiple asset classes, aiming for long-term capital preservation, steady income, and reduced volatility.
But what exactly do the richest investors do differently, and can the average person apply some of these principles to their own portfolio? Let’s take a deep dive into the strategies used by the ultra-wealthy and explore how retail investors can benefit from their approach.
The Asset Allocation of the 1%
While the typical retail investor might have a portfolio consisting of 80–90% stocks and bonds, the ultra-wealthy take a more diversified approach. According to the 2023 UBS Global Family Office Report, the average asset allocation of family offices (which manage the wealth of the ultra-rich) looks something like this:
- Public Equities (Stocks) – 25–30%
- Private Equity – 20–25%
- Real Estate – 15–20%
- Fixed Income (Bonds) – 10–15%
- Hedge Funds – 5–10%
- Gold & Commodities – 5%
- Cash & Liquidity – 5%
This allocation reflects a long-term, risk-managed approach, where investments are spread across multiple asset classes to reduce exposure to any single market downturn.
Why the Ultra-Wealthy Invest Differently
1. Private Equity: The Key to Outsized Returns
Unlike retail investors who primarily invest in publicly traded stocks, the ultra-wealthy dedicate significant capital to private equity—investments in private companies before they go public.
According to Preqin, private equity funds have delivered an average annual return of 14% over the past 20 years, outperforming public markets. These investments provide high returns but are less liquid, meaning investors must commit their capital for longer periods.
Retail investors can gain exposure to private equity through platforms like Moonfare, Fundrise, or private equity ETFs, though minimum investments and lock-up periods vary.
2. Real Estate: A Hedge Against Inflation
Real estate is a cornerstone of ultra-wealthy portfolios. High-net-worth individuals prefer real estate because it:
- Generates passive rental income.
- Appreciates over time.
- Acts as a hedge against inflation.
According to the Knight Frank Wealth Report, over 30% of HNWIs hold direct real estate investments, ranging from commercial properties to luxury residences in prime global locations.
Retail investors can access real estate investments through Real Estate Investment Trusts (REITs), crowdfunding platforms, or direct property ownership.
3. Alternative Investments: Hedge Funds & Commodities
The ultra-rich allocate capital to hedge funds, which use complex strategies like short-selling and derivatives to generate returns in both bull and bear markets.
Additionally, commodities like gold, silver, and energy assets are common holdings. Data from the World Gold Council shows that gold has historically delivered a 10-year average annual return of 7–8%, making it a popular store of value during economic uncertainty.
Retail investors can gain exposure to these alternative assets through ETFs like:
- GLD (SPDR Gold Shares) for gold.
- DBC (Invesco Commodity Index ETF) for broad commodities.
- Hedge fund replication ETFs, which mimic hedge fund strategies.
4. Fixed Income: Not Just Government Bonds
While many retail investors think of bonds as low-risk government securities, the ultra-wealthy often invest in private debt, corporate bonds, and municipal bonds that offer higher yields.
With interest rates rising, investment-grade corporate bonds now yield around 5-6% annually, providing a steady income stream while diversifying risk.
Applying the 1% Strategy to Your Portfolio
You don’t need to be a billionaire to implement some of these tactics. Here’s how retail investors can adapt ultra-wealthy investment principles on a smaller scale:
- Diversify beyond stocks and bonds: Consider adding REITs, commodities, and private equity funds.
- Increase exposure to real assets: Investing in real estate, infrastructure, or farmland can protect against inflation.
- Think long-term: The 1% prioritize multi-decade investments, rather than short-term speculation.
- Emphasize capital preservation: Ultra-wealthy investors focus on protecting wealth first, then growing it.
Platforms like Wealthfront, Fundrise, and alternative investment ETFs provide opportunities for retail investors to build a more sophisticated portfolio.
Building Wealth Like the Ultra-Wealthy
While the investing strategies of the ultra-rich are often inaccessible to everyday investors, the core principles—diversification, long-term focus, and alternative asset exposure—can benefit anyone.
By shifting away from a stock-heavy portfolio and incorporating private markets, real estate, and inflation-resistant assets, investors can reduce risk and build sustainable wealth—just like the 1%. You don’t need millions to start thinking like the 1%—you just need the right strategy.
