7 Things I Learned From My Ultra-Rich Investors
It is not about timing the markets, it is about time spent in the markets
I have been working with one of the largest Asset Management Companies for 5 years. Advising High Networth Individuals has been a part of my work profile.
Apart from that, I have been managing short term investments for corporate treasuries as well. There you require financial jargons to push the financial products. It gives a high of walking into posh offices and interacting with other finance professionals.
But, I assure you that nothing beats the experience of interacting with my wealthy clients. That is, the business owners. Every meeting is like a class where I get to learn from their vast experience. Of course, in exchange for financial advice.
To be honest, I can only introduce and explain to them the various investment vehicles. But, they already have what it takes to be a successful investor.
Every meeting is a learning experience for me. But, these are the 7 things I learnt from my ultra-rich investors in my five years of investment advisory career.
Never keep your money idle
They understand the concept that money idle is money lost. The biggest enemy of money is inflation. A $100 bill will be worth lesser if kept in the pocket for the next 5 years.
Inflation is as violent as a mugger, as frightening as an armed robber and as deadly as a hit man.
— Ronald Reagan
They understand that very well. I see finance professionals throwing jargons day in and day out. But, to understand this concept takes nothing more than common sense.
My rich investors never keep their money in the checking account. I get a call as soon as they are flushed with liquidity. The investment might be conservative in nature but it will at least beat inflation.
Always be curious to learn new things
Curiosity is a virtue that I have found common in most of my investors. They listen. They don’t act over smart, because they don’t need to.
I have no special talent. I am only passionately curious.
-Albert Einstein
They are keen on learning new things. They believe in the continuous process of value addition to their knowledge portfolio. They listen with the curiosity of a child whenever I share insights on a particular topic.
Sometimes, it may not be necessarily of any use to them for their investments. They don’t shy away from learning a thing or two from someone who is 25 years younger than them.
This is a habit that one should try to inculcate than having a know-it-all attitude.
They understand risk and hence diversify their investments
Markets can offer high-risk investment opportunities for making money in a short period. Although that might give humongous returns, it is also a sure shot way to burn your hard-earned money.
They understand risk. So no matter how enticing something could be, they limit their exposure to such investments. They don’t get carried away by the proposition of making money in a short period.
Always stay invested for a long term
This point emanates out of the last point. They understand that things take time to build. This idea is based on their experience of building a business. It cannot be built overnight.
Investing in the markets could be compared to a Bamboo tree. It takes 4 years to grow 3 cm. But, from the fifth year, it can grow up to 30 cm every day. A similar effect in investing is called compounding.
It is not about timing the markets, it is about time spent in the market.
They focus on their core business more than their investments
They do keep a close eye on their investments. But, they do not prioritise it over their main business activities.
They are quite passionate about their primary business. They don’t let the excitement of investments take a big pie out of their time.
That’s the reason they outsource their investment management. It is the most effective way to save time that could be allocated to important things. For them, nothing is more important than their core business.
Invest according to their risk appetite
Everyone is wired differently. Some people can see a dip of 20% in their portfolio and still go out and have a drink without thinking about it. While some people find it difficult to calm their nerves.
It’s important to understand yourself before you attempt to understand the markets.
“Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.”
-Warren Buffet
My ultra HNI investors understand their risk appetite. They would never trade a night’s sleep for a risky investment even with huge upside potential. The only thing they make sure of is not to keep their money idle for a long period.
Some people could be happy with returns that merely beat the inflation, while some could be as aggressive as investing in a sectoral fund. To each his own. There’s no point in getting carried away with exotic financial instruments unless you have the nerve for it.
Don't ponder over missed opportunities
Markets will stuff you with immense opportunities. The regret caused by opportunities you miss could sometimes outweigh the joy of profits you make.
Hence, it is important to limit your choices. Yes, you could miss out on some big opportunities but you need to make peace with yourself.
My affluent investors focus on reviewing the investments they make than the investment that could have been made. They don’t get anxious because of missed opportunities. You can’t catch every opportunity in the market. You just need to make the most out of the one you do.
Final thoughts
All said and done, humility is a virtue that I have found common in most of my ultra-rich investors. Nothing beats treating people with respect and kindness.
Most of them have built their business ground up. Yet, they don’t act entitled because of their position.
Here’s a summary of 7 things I learnt from my High Networth Individual investors,
- They never keep their money idle because they understand inflation
- They are always willing to learn new things
- They understand risk and make sure to diversify their investments
- They invest for a longer time period
- They prioritise their main business over their investment portfolio
- They invest only according to their risk appetite
- They don’t ponder over the lost opportunities and instead monitor the investments they make
Here’s an article I wrote that you might find interesting,
