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The U.S. stock market has performed well this year, despite tariff uncertainty, but recently went through a sluggish streak, predicted by high-net-worth investors who are increasingly betting on other types of investing.
Michael Sonnenfeldt, founder of Tiger 21, an exclusive network of ultra-high net worth investors, says the ultra-wealthy aren’t chasing stock market hype.
“They actually just pulled back a couple of points in the last quarter of the stock market and the real estate sector,” Sonnenfeldt told CNBC in September, noting that the average Tiger 21 member controls more than $100 million (1).
So where does your money go?
Private equity remains a “strong” stake, he said, but members are increasingly allocating funds to areas that were once ignored. “For the first time, cash is going up a little bit, fixed income is going up a little bit, and gold and bitcoin.”
The shift points to a more defensive stance, as Wall Street remains nervous. CNN Business reports that the good year has given investors “outsized expectations” about stock performance. Coupled with the possibility of an AI bubble and the Federal Reserve’s interest rate cut in December, investors are nervous (2).
For the Tiger 21 group and other investors like them, a greater allocation to cash and fixed income signals a renewed appetite for liquidity and stable returns after years of near-zero interest rates, while growing exposure to gold – and even Itcoin – reflects a search for alternative stores of value.
Sonnenfeldt says his members are approaching their portfolios a little more cautiously these days. Naturally, when they have created as much wealth as they have, he adds, preservation is their top priority.
That makes gold a natural destination. The precious metal has served as a store of value for thousands of years. It is not tied to any particular country, currency or economy, and cannot be printed as fiat money. Investors often flock to it during periods of economic stress or geopolitical uncertainty, driving up prices.
Gold is up more than 60% so far this year and hit highs of around $4,350 in mid-October (3). After a slight drop in November, the spot price of gold recovered in December. This performance could be indicative of the confidence many investors have placed in the commodity, unlike the stock market.
If you want to take advantage of the inflation-resistant asset, you can also bet on gold, and in a way that provides significant tax advantages, by opening a gold IRA with the help of Thor Metals.
Gold IRAs allow investors to hold physical gold or gold-related assets within a retirement account, combining the tax advantages of an IRA with the protective benefits of investing in gold, making it an attractive option for those looking to potentially protect their retirement funds against economic uncertainties.
For more information, you can get a free information guide that includes details on how to get up to $20,000 in free metals on qualifying purchases. Just keep in mind that gold is usually best used as part of a well-diversified portfolio.
Read more: Warren Buffett used 8 solid, repeatable money rules to turn $9,800 into a $150 billion fortune. Start using them today to get rich (and stay rich)
Bitcoin, once considered a niche asset, has been steadily entering the financial mainstream.
“Bitcoin as a market is still only a tenth the size of gold, but both are safe assets in the minds of members,” Sonnenfeldt said. “For the first time, people are not talking about bitcoin simply as speculation, but as an alternative asset that can be held in difficult times. Not everyone believes in it, but those who do are causing quite a stir.”
Bitcoin has taken investors on a rollercoaster ride recently, with performance falling from an all-time high of around $126,200 in early October to hovering around $85,500 (4). However, many investors remain optimistic about this alternative asset and expect its value to recover. Additionally, buying on the dip is a classic investment strategy.
Part of bitcoin’s appeal is its inherent scarcity. Like gold, central banks cannot create bitcoins at will. Instead, its maximum supply is limited to 21 million by mathematical algorithms. Its volatility is partly because it is not backed by central banks or fiat currency, although that may also be changing with the arrival of so-called “stablecoins.”
For those looking to jump on the bitcoin bandwagon, platforms like Robinhood Crypto allow users to buy and sell cryptocurrencies with as little as $1 with no trading fees or commissions.
Robinhood Crypto has the lowest average trading cost in the US, meaning you could get up to 2.6% more cryptocurrency compared to trading on other platforms.
Sonnenfeldt stressed that a slight drop in shares does not mean that his members will abandon them.
“We’re still overwhelmingly medium- and long-term weighted in stocks. So there’s long-term optimism, but in the short term, it’s a little bit choppy water, so people are trying to steady the ship on a rocky road,” he said.
He noted that many Tiger 21 members built their fortunes as entrepreneurs, where outsized returns were possible, but maintaining those profits as investors is much more challenging. To illustrate this point, he invoked the success of Warren Buffett and his famously simple strategy.
“Take Warren Buffett… his track record has been 20%, but he’s been doing it for 65 years. Our members – to become Tiger members – had returns over 20% and they could never double those returns as investors,” Sonnenfeldt said.
“So this divide between being an entrepreneur for five, 10, 20 years and creating extraordinary wealth, and then what to do with it? It’s why Warren Buffett has told his heirs to put it in the S&P, because even they won’t be able to benefit from its trajectory in the future.”
Buffett himself has often said: “In my opinion, for most people, the best thing they can do is own the S&P 500 index fund (5).” He has even included it in his estate plan, directing that 90% of his wife’s estate be placed in “a very low-cost S&P 500 index fund” after his death.
An S&P 500 index fund offers investors instant exposure to 500 of America’s largest companies across a wide range of industries, providing diversification without the need for constant monitoring or active management.
With platforms like Robinhood, you can invest in ETFs like the Vanguard S&P 500 to start saving.
Robinhood has 24/7 support and you won’t pay any commission on stocks, ETFs and options.
Their platform also offers a traditional IRA and a Roth IRA, so you can benefit from tax-efficient retirement investing. Even better, new Robinhood customers can also get a free stock selected from top US companies once you sign up and link your bank account to the app.
Finally, Sonnenfeldt noted a small pullback in real estate allocations. But this asset class remains a proven way to preserve wealth, especially in inflationary periods.
As inflation raises the cost of materials, labor and land, property values often rise in tandem. Rental income also tends to follow, providing owners with cash flow that adjusts with inflation.
In fact, Buffett has long highlighted real estate as an excellent example of a productive, income-generating asset. In 2022, Buffett commented that if he was offered “1% of all the apartment buildings in the country” for $25 billion, “I would write you a check (6).”
Because? Because no matter what’s happening in the economy, people still need a place to live, and apartments can consistently generate rental money.
Of course, you don’t need billions (or even buying a single home) to benefit from real estate investing. Crowdfunding platforms like Arrived offer an easier way to gain exposure to this income-generating asset class.
Backed by world-class investors like Jeff Bezos, Arrived lets you invest in rental home stocks with as little as $100, all without the hassle of mowing the lawn, fixing leaky faucets, or dealing with difficult tenants.
The process is simple: browse a curated selection of homes previously vetted for appreciation and income potential. Once you find a property you like, select the number of shares you want to purchase and then sit back as you begin receiving positive rental income distributions from your investment.
But Arrived isn’t the only way to invest in real estate. If you want to take advantage of this asset class, but with single-family rentals, you have more options available.
Mogul is a real estate investment platform that offers fractional ownership in prime rental properties, providing investors with monthly rental income, real-time appreciation and tax benefits, without the need for a large down payment.
Founded by former Goldman Sachs real estate investors, the team curates the top 1% of single-family rental homes nationwide for you. Simply put, you can invest in quality institutional offerings for a fraction of the usual cost.
Each property undergoes a vetting process that requires a minimum 12% return even in negative scenarios. In general, the platform has an average annual IRR of 18.8%. Meanwhile, its cash-on-cash returns average between 10% and 12% annually. Offers usually sell out in less than three hours, and investments usually range between $15,000 and $40,000 per property.
Each investment is secured by real assets, regardless of the viability of the platform. Each property is held in a separate Propco LLC, so investors own the property, not the platform. Blockchain-based fractionation adds a layer of security, ensuring a permanent and verifiable record of each share.
Getting started is quick and easy. You can register for an account and then browse available properties. Once you verify your information with their team, you can invest like a tycoon with just a few clicks.
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@CNBCtelevision(1); CNN Business (2); Forbes (3); Business insider information (4); CNBC (5), (6)
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
