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As we enter the new year, unsurprisingly what’s on a lot of people’s minds is a topic that consumed the latter half of 2021: soaring inflation.
For the ultra-wealthy, rising inflation is in fact playing a big part in how they’re choosing to invest going into the new year.
“As all investors should be, the ultra-wealthy are concerned about inflation and looking to preserve assets in 2022,” says Michael Sonnenfeldt, chairman and founder of TIGER 21, a peer-to-peer learning network for investors and entrepreneurs with $10 million to $1 billion of personal net worth.
Though the everyday investor certainly doesn’t have millions to their name, there may be ways to copy how the wealthy allocate their money, especially amid ongoing inflation fears that impact us all. Here’s how the ultra-wealthy members of TIGER 21 are investing going into 2022.
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1) Building inflation-resistant portfolios
TIGER 21 members are convinced that inflationary pressures will be permanent, not transitory. In fact, 65% of members expect inflation to accelerate in the next year.
They are therefore allocating money to some of their favorite investments to protect against inflation, such as:
Real estate, like industrial properties and apartment buildings
Public equities, or stock, in platform companies with pricing power (platform companies are those like Amazon, Apple and Airbnb), consumer staples and streaming services
Cryptocurrencies (more on this in No. 2 below)
When you think of real estate as an example of an investment to hedge against inflation, this isn’t just an asset reserved for the rich. Beyond home ownership, real estate investments can be made through REITs (also known as Real Estate Investment Trusts). A REIT is a company that invests in different kinds of income-producing real estate (shopping centers, condominiums, housing developments, hospitals, parking garages, etc). You can buy shares of the REIT in order to get exposure to its real estate investments and have that real estate be part of your investment portfolio without actually managing property yourself.
You can invest in publicly traded REITs through any brokerage account, like Fidelity, TD Ameritrade and Robinhood, while companies like Fundrise, Yieldstreet and Elevate Money allow you to buy shares in non-publicly traded REITs on your own through their platforms.
2) Doubling their crypto investments
As an alternative to investing in gold to combat inflation, TIGER members have doubled their investment in cryptocurrencies.
TIGER 21 members are putting their money specifically in ethereum (34%), bitcoin (33%), a crypto fund (23%), other coins (15%) and dogecoin (2%).
These wealthy investors certainly aren’t wrong. Bitcoin is often described as “digital gold” and theoretically should protect against inflation because of limited supply, but it’s not yet known if it will be a good inflation hedge over the long term.
Of course, everyday investors are also able to invest in crypto thanks to finance apps that make it easy. Cash App, a peer-to-peer payment service owned by Square Inc., allows users to buy bitcoin only. PayPal allows users to purchase four different cryptocurrencies: bitcoin, ethereum, bitcoin cash and litecoin. Users holding crypto on PayPal can then use it to checkout on the app as well.
Robinhood, the mobile app for stock investing, supports seven cryptocurrencies for purchase by users, including the popular dogecoin meme cryptocurrency. And personal finance provider, SoFi, allows for crypto purchases of 21 different coins and crypto tokens through its app. If you want more control over your crypto and to own it directly, Coinbase offers a platform to buy, sell, swap, store and send over 50 types of cryptocurrency.
3) Increasing investments in alternative energy
Electric vehicle stocks remain hot investments still, and the ultra-wealthy are shelling out more cash into companies like Tesla, Rivian and Lucid.
Tesla stock isn’t cheap, but you can still get exposure to the EV market by putting your money in ETFs that invest in a variety of companies tied to EVs, such as Global X Autonomous & Electric Vehicles ETF (NASDAQ:DRIV) or iShares Self-Driving EV and Tech ETF (NYSEMKT:IDRV). This is a broader investing approach, and less risky, than buying individual stocks.
Bottom line
It’s interesting to see how the ultra-wealthy are investing going into a new year with rising inflation top of mind. Because this is a concern for every investor, it’s helpful to take notes on what they are doing to hedge against inflation.
The lesson here is you don’t have to be rolling in extra millions to protect your money in the market.
Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.
NEW YORK (AP) — Shares of Tesla soared Wednesday as investors bet that the electric vehicle maker and its CEO Elon Musk will benefit from Donald Trump’s return to the White House.
Tesla stands to make significant gains under a Trump administration with the threat of diminished subsidies for alternative energy and electric vehicles doing the most harm to smaller competitors. Trump’s plans for extensive tariffs on Chinese imports make it less likely that Chinese EVs will be sold in bulk in the U.S. anytime soon.
“Tesla has the scale and scope that is unmatched,” said Wedbush analyst Dan Ives, in a note to investors. “This dynamic could give Musk and Tesla a clear competitive advantage in a non-EV subsidy environment, coupled by likely higher China tariffs that would continue to push away cheaper Chinese EV players.”
Tesla shares jumped 14.8% Wednesday while shares of rival electric vehicle makers tumbled. Nio, based in Shanghai, fell 5.3%. Shares of electric truck maker Rivian dropped 8.3% and Lucid Group fell 5.3%.
Tesla dominates sales of electric vehicles in the U.S, with 48.9% in market share through the middle of 2024, according to the U.S. Energy Information Administration.
Subsidies for clean energy are part of the Inflation Reduction Act, signed into law by President Joe Biden in 2022. It included tax credits for manufacturing, along with tax credits for consumers of electric vehicles.
Musk was one of Trump’s biggest donors, spending at least $119 million mobilizing Trump’s supporters to back the Republican nominee. He also pledged to give away $1 million a day to voters signing a petition for his political action committee.
In some ways, it has been a rocky year for Tesla, with sales and profit declining through the first half of the year. Profit did rise 17.3% in the third quarter.
The U.S. opened an investigation into the company’s “Full Self-Driving” system after reports of crashes in low-visibility conditions, including one that killed a pedestrian. The investigation covers roughly 2.4 million Teslas from the 2016 through 2024 model years.
And investors sent company shares tumbling last month after Tesla unveiled its long-awaited robotaxi at a Hollywood studio Thursday night, seeing not much progress at Tesla on autonomous vehicles while other companies have been making notable progress.
TORONTO – Canada’s main stock index was up more than 100 points in late-morning trading, helped by strength in base metal and utility stocks, while U.S. stock markets were mixed.
The S&P/TSX composite index was up 103.40 points at 24,542.48.
In New York, the Dow Jones industrial average was up 192.31 points at 42,932.73. The S&P 500 index was up 7.14 points at 5,822.40, while the Nasdaq composite was down 9.03 points at 18,306.56.
The Canadian dollar traded for 72.61 cents US compared with 72.44 cents US on Tuesday.
The November crude oil contract was down 71 cents at US$69.87 per barrel and the November natural gas contract was down eight cents at US$2.42 per mmBTU.
The December gold contract was up US$7.20 at US$2,686.10 an ounce and the December copper contract was up a penny at US$4.35 a pound.
This report by The Canadian Press was first published Oct. 16, 2024.
TORONTO – Canada’s main stock index was up more than 200 points in late-morning trading, while U.S. stock markets were also headed higher.
The S&P/TSX composite index was up 205.86 points at 24,508.12.
In New York, the Dow Jones industrial average was up 336.62 points at 42,790.74. The S&P 500 index was up 34.19 points at 5,814.24, while the Nasdaq composite was up 60.27 points at 18.342.32.
The Canadian dollar traded for 72.61 cents US compared with 72.71 cents US on Thursday.
The November crude oil contract was down 15 cents at US$75.70 per barrel and the November natural gas contract was down two cents at US$2.65 per mmBTU.
The December gold contract was down US$29.60 at US$2,668.90 an ounce and the December copper contract was up four cents at US$4.47 a pound.
This report by The Canadian Press was first published Oct. 11, 2024.
