The wealthy are known to zig when everyone else zags. In the early days of COVID, as the economy shut down, while many lost their jobs or suffered economic hardship, the wealthiest did not suffer any setbacks. Instead, they were making aggressive investment moves while everyone else sat back and waited.
When stimulus checks hit, as newbie investors dove into stocks, the wealthy doubled down on hard assets – zigging away from equities while everyone else was zagging towards them.
The economy is wrapped in uncertainty at the moment. Inflation is creeping in as public companies nationwide are suffering labor shortages and rising material prices – with bottom lines taking hits across the board.
Companies are struggling. Even as some companies struggle, their stock prices are being propped up – manipulated is a better word – by social media and online forums.
Economic uncertainty, stock manipulation, and stimulus money have given rise to a recent phenomenon: meme stocks – overvalued stocks or investments fueled by social media and favored by newbie investors.
When these newbie investors aren’t flocking to the stocks of struggling companies like Gamestop (GME) and AMC, they’re turning their attention to cryptocurrencies. And in that playground, they’re being played by Elon Musk, who is single-handedly moving the needle on a variety of cryptos based solely on his endorsement or opposition.
The cumulative effect of the meme stock phenomenon is extreme volatility in the equities and crypto markets – with stocks and currencies rising and falling by double-digit percentages in a single trading day. Now, with the word “overvalued” making the rounds and with inflation creeping in, many experts are sounding the alarm on a potential market crash.
To say that uncertainty is overshadowing the public and crypto markets would be an understatement.
Why go down with the herd?
So instead of investing in so much uncertainty, why not zig?
Invest where the affluent and wealthy are investing. It’s a market that is unaffected by meme stocks, cryptos, inflation, and shortages. Invest in private markets in tangible alternatives that cash flow and appreciate over time – even in a downturn.
While most investors allocate a majority of their portfolios to public equities, the wealthy allocate most of their portfolios to private investments. And what is their favorite private investment? Real estate.
According to the most recent quarterly asset allocation report of the members of Tiger-21 – a social network of ultra-high-net-worth individuals (UHNWIs) with a minimum of $50 million in investable assets – these UHNWIs allocated more than 27% of their investable assets in commercial real estate.
Why private real estate?
Unlike stocks and public real estate offerings like REITs, private real estate is immune from the madness of the herds and uncertainty of the markets. And real assets that meet an essential need with sustained demand – even through downturns – are ideal for insulating income against recessions.
The wealthy weather storms like COVID because of cash flowing recession-resistant real assets. And allocations to specific segments that not only survive but thrive in a downturn are ideal for preserving income through tough times. So, while many panic over job loss and final distress in hard times, the wealthy tap the passive income from their private real asset investments to maintain their lifestyles.
Why invest in uncertainty?
Invest in the one unshakeable asset that the wealthy have relied on for decades to insulate their finances and wealth from financial distress and uncertainty – private real estate.