Wealthy entrepreneurs aren't spooked by the stock market and are holding the line on their allocation to stocks and bonds, according to a survey of Tiger 21, an exclusive group of 220-plus investors with a median net worth of $75 million.
Those wealthy investors are bullish, holding firm on their equity allocations from fourth quarter 2012 to the end of the third quarter this year. On average, members allocate 24 percent to equities. They decreased their cash allocation by 1 percentage point, to 11 percent.
The remainder of the portfolio is made up of hedge funds, 8 percent; private equity, 19 percent; fixed income, 15 percent; real estate, 21 percent; commodities, 1 percent; and currencies, slightly less than 1 percent.
Investing lessons from the rich
Entrepreneurs are generally more willing to take a risk than average investors; not everyone is comfortable with the allocations of the members of Tiger 21 -- nor does the average investor have access to some of the investing opportunities of the super-wealthy.
But the takeaway from the survey is that the average portfolio of the rich combines growth (equities and real estate) with relative safety (cash and fixed income) and is well-diversified among asset classes. The rich don't want to lose money any more than anyone else does.
Members of Tiger 21 are also monitoring their portfolios quarterly and making minor adjustments to investment allocations. While it's never wise to chase returns, keeping a close eye on investments is a good idea, as is maintaining diversification. For example, the average 11-percent cash allocation is close to the median 13 percent allocation since Tiger 21 began tracking percentages in 2008.
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