You must have often heard of the phrase “High net worth individuals” and would have immediately framed an idea of what it could possibly mean. Let me elaborate a little more to help you understand better. A High Net Worth Individual, or simply HNWI, is someone whose liquid assets are at least $1 million in worth. These assets do not include property, and financial professionals are hired by these individuals to manage these assets. HNWIs are either big-time professionals or entrepreneurs who explore varied options to augment and manage their financial resources.
Obviously, investments are extremely important for HNWI. If you want to keep your money growing with time, you will take bigger risks and make investments. And, HNWIs know that these risks are essential to maintain their status and perhaps improve it to Ultra High Net Worth Individuals who possess a minimum of $30 million in liquid assets. But, what areas should HNWIs consider? Read below to know about 5 of them.
- Fixed Income and Equities
Of course, we all have heard about these and may or may not have a grand opinion about them. However, you should know that these are quite effective in securing your capital and at the same time producing returns. Yes, there is not much to do when investing in these but why should it bother you that these methods are obvious.
- Invest in tangible assets
HNWIs are known to have an affinity for tangible assets, especially real estate. When the aim is to create long-term wealth, this option often takes precedence over many others. The benefits are quite straightforward: the asset will keep growing over time and at the same time keep generating cash. For instance, you invested in a property and rented it out to some retailer.
Now your asset is anyway growing and you are getting periodic returns in the form of rent. You should also consider investing in Real Estate Investment Trusts (REITs); these are companies that assist in managing and financing income-generating real estate and offer investment opportunities very much like mutual funds.
- Mutual Funds
This brings us to the fourth area of potential investment. You don’t have to be an expert to invest in stock markets directly. If you are one, great! But, in case you aren’t, then you should let experts do it for you through mutual funds. Investing through mutual funds is said to be one of the most viable options for those HNWIs who may not be as risk-takers as others and want to place their money in the hands of a mutual fund to be invested in securities. You have the option to invest a large one-time amount or make periodic payments towards the same.
- Sovereign Bonds
Who doesn’t love an assured source of income? Of course, risks are everywhere but we surely deserve to protect some bit of our money. Well, sovereign bonds offer a chance to do the same. These are the bonds the national government issues to raise capital and are essential debt securities.
Generally, these bonds are issued when there is a shortage of resources to fund national programs. That being said, you will get an interest in the same. Many governments such as India issue Sovereign Gold Bonds which are often called paper gold and allow you to own gold without having to secure them in a locker and earn interest on the same.
- Invest in a hedge fund
The stock market is volatile. Yes, there are strategies to determine its health and its ups and downs but how much can you know? There is always a running risk and HNWIs usually want to keep close a way out to offset losses as much as they can. Investment through a hedge fund is a way. Basically, it is an investment pool managed by professionals whose aim is to minimize risk. Ironically, however, these funds are deemed highly risky and their reputation depends on the managers. You should note that investment through a hedge fund is relatively expensive.
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