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Warren Buffett, Elon Musk, and Jeff Bezos are among the wealthiest Americans who ever lived. The majority of their wealth is in stocks. But when it comes to investing in the stock market, today’s rich young Americans are not following in their footsteps.
The stock market has long been the go-to choice for people looking to invest their money. But that could be about to change as a younger generation — with a preference for alternative investments outside the shaky stock market — enters the scene.
According to a recent survey from Bank of America, individuals aged 21 to 43 with at least $3 million in assets only have 25% of their portfolio invested in stocks — compared to 55% for wealthy investors aged above 43.
Most rich, young Americans (93%) say they plan to allocate more of their portfolio to alternatives in the next few years. So, what alternative investments are capturing the interest of these young millionaires?
Artwork: a creative way to diversify
More than 72% of younger investors (ages 21-43) believe it is no longer possible to achieve above average investment returns by investing solely in traditional stocks and bonds. Art is one of the alternative investments that has captured the attention of smart investors.
With over $67 billion in annual transaction volume and a total estimated global value of $1.7 trillion, art represents a massive asset class, according to Deloitte.
In fact, fine art has historically outperformed the S&P 500, with contemporary art achieving an annual return of 11.5% from 1995 to 2023, compared to the S&P 500’s 9.6% during the same period.
In the past, you had to be ultra wealthy to invest in art, considering you needed to have the millions it takes to buy a painting at an auction.
But Masterworks has now changed that. This investment platform has made it possible for more investors to access this prized asset.
Instead of buying a single painting for millions of dollars at auction, you can now invest in fractional shares of blue-chip paintings by renowned artists including Pablo Picasso, Basquiat and Banksy.
All you have to do is select how many shares you want to buy and Masterworks will take care of the rest.
Masterworks investors have realized representative annualized net returns like +17.6%, +17.8%, and +21.5% (among assets held for longer than one year).
New offerings often sell out quickly but you can skip the waitlist here.
- See important Regulation A disclosures at Masterworks.com/cd
A golden opportunity to hedge against inflation
The Bank of America survey revealed that among wealthy young investors, 45% own gold as a physical asset, and another 45% are interested in holding it.
Historically, gold has served as a hedge against inflation and market volatility. Many investors turn to “safe haven” assets like gold during economic and geopolitical instability to preserve their wealth.
The enthusiasm of investors has indeed propelled the price of gold to record levels with the precious metal recently surging past the $2,300 per ounce mark.
There are lots of gold assets to choose from, including gold bars, coins and gold stocks.
But right now, opening a gold IRA could be particularly practical as part of your long-term strategy.
Opting for a gold IRA with help from Preserve Gold gives you the opportunity to diversify your portfolio, stabilize your finances and secure your retirement by allowing you to invest directly in physical precious metals rather than stocks and bonds.
As one of the country’s most trusted precious metals companies – with an A rating from the Better Business Bureau – Preserve Gold has helped thousands of clients protect their retirement.
If you think this might be the right investment for you, you can request a free information guide that can help you learn how to diversify your portfolio and secure your retirement fund.
Real estate: rich with opportunity
Real estate has long been considered a solid portfolio hedge, as rent and property values tend to increase with inflation. It’s no surprise that high-net-worth individuals — regardless of their age — see opportunity in this asset.
In the Bank of America survey, 31% of younger people said real estate presents the greatest opportunities for growth. Federal Reserve data also shows that the top 1% of Americans hold over $6 trillion in real estate assets.
A recent report from Cushman & Wakefield also commented, “for the first time in years, the retail market is at a point of being supply-constrained — at least for space in quality shopping centers."
With both commercial and residential supply constrained, rental prices could be pushed higher, creating attractive returns for investors.
First National Realty Partners allows individual investors to access institutional-quality commercial real estate investments. With FNRP, investors own a share of properties leased by national brands like Whole Foods, CVS, Kroger and Walmart, providing a stable, positive cash flow without the worry of tenant costs and management.
With FNRP, everyday investors can become the landlord of these big-name brands, accessing the potential for greater returns, diversification, and transparency.
The firm also offers white-glove service for investors, providing key market insights and finding the best properties both on and off-market, while investors can passively collect distribution income.
Cryptocurrency: more than a craze
Investors used to be skeptical about cryptocurrency, perhaps due to its speculative and highly volatile nature. But it has now entered the mainstream, and especially with President-elect Trump vowing to create a “strategic national Bitcoin stockpile”, crypto has surged to a global market cap of $3.57 Trillion, a 109% jump from one year ago.
It’s no surprise that the wealthy millennials and Gen Z are fond of this asset class. In the Bank of America survey, 29% of younger people said cryptos offer the greatest opportunities for growth, while only 7% of the older group agreed.
Rich young Americans also allocated 15% of their portfolios to crypto, compared to 2% of the older generation.
If you’re interested in getting in on the crypto game, you can join the club through Robinhood Crypto, where you can buy and sell crypto without any trading fees or commissions.
What’s more — you can get up to a 1% deposit match on all crypto deposits and transfers.
Robinhood Crypto has the lowest average trading cost in the U.S., which means you could get up to 3.6% more crypto when you trade with Robinhood Crypto.
Private equity investing
Private equity refers to investments in companies that are not publicly traded on a stock exchange. This asset class involves investing directly in private companies, often during their growth stages or through buyouts.
It remains a popular choice among young investors seeking higher returns and more control over their investments.
The Bank of America survey showed that over 25% of young wealthy millionaires identified private equity as one of the greatest growth opportunities.
While private equity offers significant upside potential, it also requires a longer-term commitment and comes with higher risks than public equities.
Private equity is a broad category that spans a wide range of assets. So, finding a firm that can help you allocate your capital to the right assets, could be a way to dip your toe into this lucrative category.
With Fundrise you get access to an expansive portfolio of alternative investment opportunities spanning real estate, private debt and venture capital.
With over two million investors and managing over $7 billion in real estate assets alone, Fundrise is an accessible way to diversify your portfolio with the potential of yielding dividends every quarter.
To get started, all you have to do is share some details about financial background and investing style, then Fundrise will build a portfolio for you that aligns with your goals and risk tolerance
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
