In 1989, the top 1% of households in the United States controlled a little less than 23% of the wealth in this country. That number has now reached nearly 32%. By contrast, the bottom 90% have seen their share of wealth drop from 40% in 1989 to 31% today.
The rich have gotten richer, and they are extending their lead.
You could explain this rising inequality on various government policies but there is an investing component here as well. Many people assume there must be secret investment opportunities reserved for the wealthy. Surely, once you make more money there are exclusive deals, alternative investments, and superior investment managers at your disposal?
This may be the case for a handful of investors, but if we look at how the top 1% and top 10% allocate their assets, it shows a much simpler path to wealth.
The top 10% holds nearly 70% of U.S. wealth:
These numbers from the Federal Reserve are broken down by net worth, which is simply calculated by taking the assets and subtracting the liabilities. When we break things down by assets and liabilities, you can see that while the top 10% controls 70% of the assets, the bottom 90% holds 75% of the debt:
The bottom 50% by wealth percentile owns just 6% of assets but a whopping 32% of liabilities.
Ownership in the stock market is still more uneven. The top 1% owns more than 53% of stocks while the top 10% holds 89% of the total:
Stocks are the asset class that historically has the highest long-term returns so it makes sense that the gap between the haves and the have-nots has grown.
Things are far more equal when it comes to the housing market:
While the bottom 90% by wealth holds just 11% of the stock market, they control 56% of the housing market. The bottom 50% owns less than 1% of the stock market but nearly 12% of the housing market. This helps explain why the liabilities for the bottom 90% are so much higher since most of these households have mortgage debts to repay.
You can get a better sense of the differences between the various wealth percentiles by looking at their allocations to stocks and housing relative to their total assets:
The top 1% also has a higher share in things like cash, bonds, and private businesses. But you can see from the chart that most of their wealth is invested in the stock market, while housing is by far the biggest asset for those in the bottom 90%.
So what can we learn about investing like the 1% when it comes to how they allocate their assets?
Don’t concentrate your investments. While the bottom 90% has most of their wealth concentrated in a single asset—their home—the top 1% has a more balanced approach. A house will likely always be the biggest asset for the majority of Americans, but it’s important to diversify your money into other assets like stocks and bonds.
Don’t go into a lot of debt. There are good and bad forms of debt. Most of us need to utilize mortgage debt because not many people have that much money lying around in cash. But it’s important to note that debt compounds against your net worth much like stock returns compound in your favor.
Buy stocks. Not everyone has the ability to own their own business, but you can own a share of corporate profits by investing in the stock market. The stock market remains the simplest way to build wealth over the long term by riding the coattails of the biggest and best companies in the world.
Certain securities mentioned in this article may be currently held, have been held, or be held in future in the author’s personal portfolio or a portfolio managed by Ritholtz Wealth Management.
Tense diplomatic relations may not impact trade, investment ties between India, Canada: Experts
NEW DELHI: The tense diplomatic relations between India and Canada are unlikely to impact trade and investments between the two countries as economic ties are driven by commercial considerations, according to experts. Both India and Canada trade in complementary products and do not compete on similar products.
“Hence, the trade relationship will continue to grow and not be affected by day-to-day events,” Global Trade Research Initiative (GTRI) Co-Founder Ajay Srivastava said.
Certain political developments have led to a pause in negotiations for a free trade agreement between the two countries.
On September 10, Prime Minister Narendra Modi conveyed to his Canadian counterpart Justin Trudeau India’s strong concerns about the continuing anti-India activities of extremist elements in Canada that were promoting secessionism, inciting violence against its diplomats and threatening the Indian community there.
India on Tuesday announced the expulsion of a Canadian diplomat hours after Canada asked an Indian official to leave that country, citing a “potential” Indian link to the killing of a Khalistani separatist leader in June.
Srivastava said these recent events are unlikely to affect the deep-rooted people-to-people connections, trade, and economic ties between the two nations.
Bilateral trade between India and Canada has grown significantly in recent years, reaching USD 8.16 billion in 2022-23.
India’s exports (USD 4.1 billion) to Canada include pharmaceuticals, gems and jewellery, textiles, and machinery, while Canada’s exports to India (USD 4.06 billion) include pulses, timber, pulp and paper, and mining products.
On investments, he said that Canadian pension funds will continue investing in India on grounds of India’s large market and good return on money invested.
Canadian pension funds, by the end of 2022, had invested over USD 45 billion in India, making it the fourth-largest recipient of Canadian FDI in the world.
The top sectors for Canadian pension fund investment in India include infrastructure, renewable energy, technology, and financial services.
Mumbai-based exporter and Chairman of Technocraft Industries Sharad Kumar Saraf said the present frosty relations between India and Canada are certainly a cause for concern.
“However, the bilateral trade is entirely driven by commercial considerations. Political turmoil is of a temporary nature and should not be a reason to affect trade relations,” Saraf said.
He added that even with China, India has acrimonious relations but bilateral trade continues to remain healthy.
“In fact, bilateral trade is an effective tool to improve political relations. India must make special efforts to increase our bilateral trade with Canada,” Saraf said.
India and Canada have a strong education partnership. There are over 200 educational partnerships between Indian and Canadian institutions.
In addition, over 3,19,000 Indian students are enrolled in Canadian institutions, making them the largest international student cohort in Canada, according to GTRI.
According to the Canadian Bureau for International Education (CBIE), Indian students contributed USD 4.9 billion to the Canadian economy in 2021.
Indian students are the largest international student group in Canada, accounting for 20 per cent of all international students in 2021.
Benefits of educational partnerships are mutual and hence the current situation may have no impact on the relationship, Srivastava said.
Apple supplier Foxconn aims to double India jobs and investment
Apple supplier Foxconn aims to double its workforce and investment in India by next year, a company executive said on Sunday.
Taiwan-based Foxconn, the world’s largest contract manufacturer of electronics, has rapidly expanded its presence in India by investing in manufacturing facilities in the south of the country as the company seeks to move away from China.
V Lee, Foxconn’s representative in India, in a LinkedIn post to mark Indian Prime Minister Narendra Modi’s 73rd birthday, said the company was “aiming for another doubling of employment, FDI (foreign direct investment), and business size in India” by this time next year.
He did not give more details.
Foxconn already has an iPhone factory employing 40,000 people in the state of Tamil Nadu.
In August, the state of Karnataka said the firm will invest US$600 million for two projects to make casing components for iPhones and chip-making equipment.
The company’s Chairman Liu Young-way said in an earnings briefing last month that he sees a lot of potential in India, adding: “several billion dollars in investment is only a beginning”.
Taiwan election: Foxconn’s Terry Gou taps star-powered running mate
Last month, Foxconn’s billionaire founder Terry Gou said he would run for the Taiwanese presidency in next year’s election, as an independent candidate.
He said the ruling and independence-leaning Democratic Progressive Party (DPP) was unable to offer a bright future for the island and left Foxconn’s board following his decision to run.
The firm operates the world’s largest iPhone plant, in the city of Zhengzhou in Henan province.
Foxconn to double workforce, investment in India by ‘this time next year’
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