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Heading into the new year, unsurprisingly, a topic that will consume the second half of 2021 is on the minds of many: soaring inflation.
For the ultra-rich, rising inflation actually plays a big role in how they choose to invest heading into the new year.
Michael Sonnenfeldt, chairman and founder of TIGER 21, said: “As all investors should be, the ultra-rich are concerned about inflation and want to protect their assets in 2022. To $1 billion personal net worth.
While everyday investors certainly don’t have millions to name, there may be ways to replicate how the rich distribute their money, especially with ongoing inflation concerns affecting us all. Here’s how the ultra-rich members of TIGER 21 will invest in 2022.
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1) Build an inflation-resistant portfolio
TIGER 21 members believe that inflationary pressures will be permanent, not temporary. In fact, 65% of members expect inflation to accelerate next year.
So they allocate funds to some of their favorite investments to Prevent inflation, such as:
- Real estate, such as industrial properties and apartment buildings
- Public stocks or shares of platform companies with pricing power (platform companies such as Amazon, Apple, and Airbnb), consumer staples, and streaming services
- Cryptocurrencies (more on this in Section 2 below)
When you think of real estate as an example of an investment that hedges against inflation, it’s not just an asset reserved for the rich. In addition to home ownership, real estate investing can also be done through real estate investment trusts (also known as REITs). A REIT is a company that invests in different types of income-generating real estate (shopping malls, apartments, housing developments, hospitals, car parks, etc.). You can buy shares in a REIT to gain exposure to its real estate investments and make that real estate part of your portfolio without having to manage the real estate yourself.
You can invest in publicly traded REITs such as Fidelity, TD Ameritrade, and Robinhood through any brokerage account, while companies such as Fundrise, Yieldstreet, and Elevate Money allow you to buy shares in privately traded REITs yourself through their platforms.
2) Double their crypto investment
TIGER members double their investments as an alternative to investing in gold to fight inflation cryptocurrency.
TIGER 21 members dedicate their funds to Ethereum (34%), Bitcoin (33%), crypto funds (23%), other coins (15%) and Dogecoin (2%).
These wealthy investors are certainly not wrong. Often described as “digital gold,” Bitcoin should theoretically be inflation-proof due to its limited supply, but whether it will be a good inflation hedge in the long run is unclear.
Of course, everyday investors can also easily invest in cryptocurrencies through financial apps. Cash App is a peer-to-peer payment service owned by Square Inc. that only allows users to buy bitcoin. PayPal allows users to buy four different cryptocurrencies: Bitcoin, Ethereum, Bitcoin Cash and Litecoin. Users who hold cryptocurrency on PayPal can also use it to check out on the app.
Robinhood, a mobile app for stock investing, supports seven cryptocurrencies for users to buy, including the popular Dogecoin meme cryptocurrency. Personal finance provider SoFi allows the purchase of 21 different coins and crypto tokens through its app. If you want more control over your cryptocurrency and own it outright, Coinbase offers a platform to buy, sell, exchange, store and send over 50 cryptocurrencies.
3) Increase investment in alternative energy
Electric vehicle stocks remain a hot investment, and the super-rich are pouring more cash into companies like Tesla, Rivian and Lucid.
Tesla stock isn’t cheap, but you can still get into the electric car market by putting money in ETFs that invest in various companies related to electric vehicles, such as the Global X Autonomous & Electric Vehicles ETF (NASDAQ:DRIV) or the iShares Self-Driving EV and Tech ETF (NYSEMKT:IDRV). It’s a broader approach to investing and less risky than buying individual stocks.
It’s interesting how the super-rich are investing in the new year amid rising inflation. Because this is a concern for every investor, it is helpful to document what they are doing to hedge against inflation.
The lesson here is that you don’t have to invest extra millions to protect your money in the market.
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Editor’s Note: The opinions, analyses, comments or recommendations expressed in this article are those of select editorial staff only and have not been reviewed, approved or otherwise endorsed by any third party.
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