Anyone who buys or sells gold will believe that it is an investment favored by the ultra-rich. This applies to anyone selling gold services, gold investment advice, or anything else related to the shiny yellow metal.
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But do the ultra-rich actually invest large sums of money in gold? And what do the people who actually hold gold like about it?
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Gold in the portfolio of wealthy investors
Property consultancy Knight Frank conducts an annual survey of wealthy individuals to understand where they are investing in the current market.
The average ultra-high net worth individual (UHNWI) with a net worth of over $30 million was found to own a small amount of gold. They just don’t own huge vaults and aren’t swimming in gold like Scrooge McDuck.
The average ultra-high-net-worth individual holds about 2% of their net worth in gold. This is more than the amount they hold in cryptocurrencies (1%), but less than the amount they hold in other asset classes.
In fact, wealthy investors spend more money on “passion investments” such as art, wine, and cars than they do on gold. These passion investments make up 3% of the average wealthy investor’s portfolio (not that we should imitate them in this regard).
Why do investors buy gold in the first place?
Most investors primarily view gold as a defensive investment. It provides some protection against risks such as inflation and a weaker US dollar. In times of inflation and currency depreciation, investors flock to gold as a reliable store of value.
Gold also protects against geopolitical uncertainty. A change in wind direction can shake up currencies or spark a trade war (or an actual war), spooking investors with their perception of gold’s safety.
Many investors believe that gold stocks have a negative correlation with the stock market and that gold tends to rise in value during stock market corrections and crashes. However, some academic research questions that assumption.
In other words, investors treat gold like a risk hedge.
However, since gold does not generate income, its value depends only on investors’ perception of its value. That being said, new platforms such as Monetary Metals are starting to enter the market to allow investors to earn income from gold, but through loans.
What do wealthy people invest in besides gold?
Well, everything but cryptocurrencies. But that’s not a very useful answer.
Almost a third (32%) of the average ultra-high-net-worth individual’s net worth is in their home or vacation home. The average ultra-high-net-worth individual holds an additional 14% of their net worth in directly owned commercial real estate. On the passive investment side, we hold 5% of our net assets in commercial real estate funds, a further 3% in real estate investment trusts (REITs), and 6% in private equity (which often means group real estate investments). Masu.
And of course, wealthy people invest in stocks. Almost a fifth (18%) of ultra-high-net-worth investors’ net worth is held in stocks. The next 12% of your net worth is in bonds.
In other words, wealthy people own small amounts of gold. But it primarily serves as a defensive hedge against unexpected crises, rather than a wealth-building strategy.
final thoughts
When you worry that the world is headed for crisis, a little money can help you sleep at night. But don’t think that money will make you rich.
If you fear an impending market crash or a spike in inflation, consider investing a few percent of your net worth in the yellow metal simply as a safeguard and to calm your nerves.
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This article originally appeared on GOBankingRates.com: How much do the ultra-rich actually invest in gold?
