5 Things Wealthy People Do with Their Investments That You Can Do Too

Written by Bloom Investment Counsel, Inc. on September 18, 2024. Posted in Investing.

When it comes to wealth, many people assume that the rich have secret strategies or insider knowledge that set them apart. While it’s true that wealth often brings access to exclusive opportunities, the core investment practices of wealthy individuals are more accessible than they might seem.

By understanding and implementing these strategies, you too can enhance your financial growth and build a more secure future. This article explores five key investment practices of wealthy people and shows how you can apply these same principles to your own portfolio.

1. Diversification: Don’t Put All Your Eggs in One Basket

Diversification is a fundamental principle of investing that involves spreading your investments across various asset classes (e.g. stocks, bonds, and real estate) and sectors (e.g. financial services, industrials, and consumer staples), to reduce risk. Wealthy individuals understand that having all their investments in a single asset or sector can expose them to significant financial risk. By diversifying, they mitigate the impact of a poor-performing investment or sector on their overall portfolio, as gains in one area can offset losses in another.

How to Achieve Diversification:

Assess Your Current Portfolio: Start by evaluating the current distribution of your investments. Determine if you are overly invested in one type of asset or sector.
Create a Diversified Strategy: Based on your risk tolerance and financial goals, create a diversified investment plan.
Monitor and Adjust: Regularly review your portfolio to ensure it remains balanced and aligned with your goals. Rebalance as needed to maintain your desired asset allocation.

2. Long-Term Vision: Invest with Patience and Purpose

Wealthy individuals often take a long-term approach to investing, understanding that building and preserving wealth requires patience and discipline. They focus on long-term goals, such as retirement or funding their children’s education, rather than seeking quick gains. This strategy helps them ride out market volatility and benefit from compound growth over time.

How to Adopt the Long-Term Investment Philosophy:

Set Clear Financial Goals: Define what you want to achieve with your investments, whether it’s retirement, buying a home, or funding education.
Develop a Long-Term Plan: Create an investment plan that aligns with your goals and time horizon. Choose investments that match your risk tolerance and target returns over the long term.
Stay Committed: Resist the temptation to make frequent changes based on short-term market movements. Focus on your long-term objectives and maintain your investment strategy.
Review Periodically: While you should stay committed, it’s also important to review your plan periodically to ensure it remains on track and adjust if necessary.

3. Leveraging Expertise: Seek Professional Advice

Wealthy individuals often consult financial professionals, tax professionals, and investment managers to make informed decisions and optimize their financial strategies. These experts provide valuable insights, help with tax planning, and offer tailored investment advice based on individual circumstances. By leveraging such expertise, wealthy individuals are able to navigate complex financial decisions with greater confidence.

Ways You Can Seek Professional Advice:

Find a Reputable Investment Manager: Look for one with a good track record and relevant experience.
Prepare for Consultations and Ask the Right Questions: Before meeting with an investment manager, gather your financial documents and outline your goals and concerns. Inquire about the investment manager’s fee structure, investment philosophy, and how they plan to help you achieve your goals.

4. Regular Monitoring and Rebalancing: Keep Your Investments on Track

Wealthy individuals understand that investment success requires ongoing attention. Regular monitoring and rebalancing help ensure that their portfolios stay aligned with their financial goals and risk tolerance. By adjusting their investment mix in response to market changes and personal circumstances, they can maintain optimal performance and minimize risk.

How to Stay on Top of Your Investments:

Set a Review Schedule: Decide how often you will review your portfolio — quarterly, semi-annually, or annually.
Use Investment Tools: Leverage financial tools and software to track your portfolio’s performance and assess its alignment with your goals.
Rebalance as Needed: If your portfolio deviates significantly from your target asset allocation due to market movements, rebalance by buying or selling investments.

5. Investing in Education and Self-Improvement: Knowledge is Power

Wealthy individuals often invest in their education and personal development to enhance their financial acumen and decision-making abilities. By continuously learning about investment strategies, market trends and financial principles, they make more informed choices and adapt to changing financial environments.

How You Can Stay Educated:

Read Financial Books: Start with well-regarded books on investing and personal finance to build a solid foundation.
Take Online Courses: Enroll in online courses or webinars that cover investment strategies, financial planning, and market analysis.
Attend Seminars and Workshops: Participate in financial seminars, workshops, or conferences to gain insights from experts and network with other investors.
Stay Updated: Follow reputable financial news sources, blogs, and podcasts to keep informed about market trends and investment opportunities.

Invest with Bloom

Bloom Investment Counsel, Inc. can help you enhance your financial well-being and achieve your long-term goals . For close to 40 years, Bloom has been providing investment management services for its clients with a diversified portfolio utilizing a long-term investment philosophy. Contact Bloom today to learn more how Bloom can help you build a more secure and prosperous financial future. For more information call 416–861–9941 or email info@bloominvestmentcounsel.com.

This content is provided for general informational purposes only and does not constitute financial, investment, tax, legal or accounting advice nor does it constitute an offer or solicitation to buy or sell any securities referred to. Individual circumstances and current events are critical to sound investment planning; anyone wishing to act on this content should consult with his or her financial partner or advisor.