There are millions and millions of retail investors, while the number of ultra-wealthy investors pales in comparison. And while the average retail investor fails to beat the market, the average ultra-wealthy investor has $30 million in investable assets.
There are several reasons the ultra-wealthy investor continually builds upon their wealth while the average retail investor struggles to keep up.
The truth is, most retail investors are better off just putting their money in an index fund to keep pace with the market. Instead, they’re looking to beat the market, but they let this one thing get in their way that the ultra-wealthy avoid in their investment choices: emotions.
The ultra-wealthy take emotions completely out of the investing equation, and that’s how they’re able to set aside distractions and focus on what’s most important – the fundamentals.
I’ve compiled a list of distinctions between the habits of ultra-wealthy and everyone else:
The ultra-wealthy spend their money to save time. The poor don’t value their time.
Time is a valuable commodity for the ultra-wealthy – time to spend with family and make the world a better place. The ultra-wealthy focus on building wealth to buy back their time.
The poor don’t value their time. They value “things” more and spend almost all their time working to pay for their things. Their priorities are flipped. They trade time in for money to accumulate more things that don’t build wealth but diminish it. The poor are slaves to time, while the ultra-wealthy are in control because of their investment approach and choices.
The ultra-wealthy model their investment behaviors after other ultra-wealthy investors. Poor people listen to everyone’s advice.
The rich are willing to lean on the expertise and advice of those who blazed their own trails. The rich value their time and don’t see the point in reinventing the wheel. If there’s a proven formula for building wealth, why mess with that formula.
The poor listen to everyone’s advice. They don’t discriminate between experts and charlatans – as long as the message is interesting, new, exciting, or stimulating. Whoever’s trending or generating the most hype is who the poor will gravitate towards.
It’s all about the delivery for the poor and less about the substance. The ultra-wealthy could care less about entertainment value. They’re ok with boring as long as boring builds wealth.
Rich people think about new ways to provide value. Poor people think about making a quick buck.
The rich think long-term and conduct themselves and their investments accordingly. They’re deliberate in their actions – always asking if what they do will provide long-term value. They’re open to new investment ideas as long they satisfy their basic investment objectives and principles.
The poor don’t think long-term. They’re after a quick buck at the risk of losing everything. The rich hate losing a buck as much as gaining one, so they don’t gamble. They take risks – but calculated ones.
Rich people educate themselves about money, investing. Poor people escape into entertainment.
This goes back to the rich valuing time. They don’t waste a minute. They use their time educating themselves about money and investing while the poor occupy their time glued to their screens.
Rich people multiply their money by investing. Poor people only think about working for money.
The rich seek to multiply their money, so they never have to think about it. Financial independence means never having to worry about how the bills are going to be paid ever again. At that point, money has no grip over the rich.
Money always has a grip on the poor. Not having enough is all they think about, and they’re stuck in a vicious cycle of continually having to work for the money they’ll never have enough of because they’re not putting that money to work for them as the rich do.
Rich people live within their budget. Poor people make impulsive buys to impress others.
Contrary to popular belief, most rich people don’t flaunt their wealth. Most aren’t into conspicuous consumption – to be seen of others. They live within their budgets because there are more important things than keeping up with the Joneses.
The poor spend to be seen by others, and with social media, it’s to be seen by a larger and larger audience.
Rich people focus on creating an upward spiral in their life. Poor people stay in a misery loop.
Rich people understand the power of compounding. Compounding ensures growth and preservation of multi-generational wealth – a wealth that will last generations. Their investment decisions must not only meet their expenses in their own lifetimes but provide for future generations.
Poor people are stuck in an endless loop of never having enough.
The rich have multiple investment streams that make them money in their sleep. The poor have one income stream that occupies their waking hours.
The poor are always one paycheck away from financial disaster. While the poor wait with bated breath for the next round of stimulus checks, the rich rely on their own financial relief from their multiple streams of passive income. If one stream falters, the other streams pick up the slack.
Rich people find successful people to network with. Poor people spend time with other broke people.
There are plenty of rich people who were once poor. Many of them lifted themselves by the bootstraps by learning from the rich – surrounding themselves with individuals with the knowledge and the wisdom to create and maintain wealth.
The poor who stay poor surrounds themselves with like-minded individuals because it’s more comfortable being around others in the same situations.
Rich people plan their expenses. Poor people have no clue.
The rich have the finger on the pulse of their expenses because the more they can reduce their expenses, the more of their income they have to invest. You can say the rich are pro-active with their expenses – staying on top of, controlling, and reducing them.
Poor people are reactive to their expenses – ignoring them until it’s too late and going into debt for a short-term fix to a long-term spending problem.
There’s no secret formula to being rich.
Anyone can adopt the habits of the rich. There’s no secret society and no secret formula. The proof is in the pudding. Most of the ultra-wealthy didn’t inherit their wealth. Most are self-made. The profile of the ultra-wealthy investor is not complicated.
Educate yourself, save, surround yourself with successful people, and invest with an eye on the future are all simple concepts anyone can incorporate into their own lives. It’s just a matter of putting it all into practice.