Many people want to invest in assets because that is the only way they can achieve financial independence. There are many types of assets, in this article I will show you classes of assets that rich people invest in. 

Assets are anything that puts money in your pockets that is a simple definition that I learned from Robert Kiyosaki’s book Rich Dad Poor Dad, he defined liability as anything that takes money out of your pocket. Rich people keep their investing nice and boring, they don’t keep on changing their assets month after month, they invest and they wait for a long time, over twenty years. 

Here are some of the assets that rich people invest in;

1. Business

The number one assets that rich people invest in are businesses. Today the youngest billionaire in the world started a company. They own companies like Google, Facebook et al. The other way to invest in a business is to just invest in an established business; this can be done by buying stocks in those companies.

The richest people on the Forbes list started a business. Jeffrey Preston Bezos is an American entrepreneur who started an online business called amazon, the world’s largest retailer. Bezos has accumulated 201.2 billion USD 

Bernard Arnault, CEO of Louis Vuitton SE, the world’s largest luxury goods company, has a net worth of 176.8 billion USD. You can accumulate such as an employee. 

Here are the characteristics of an ideal business.

2. Stocks

“Stock is the best investment you’ll ever make, outside of a house.” Peter Lynch

According to Forbes stocks are units of ownership in a company, also known as shares of stock or equities. When you buy a share of stock, you’re purchasing a partial ownership stake in a company, entitling you to certain benefits.

In short, a stock is a portion of a company that one buys, that makes them a small part-owner of the company and therefore entitled to the growth and profitability of the company. Rich people like stock because it can be converted to cash quickly. This is what is known as liquidity. The good thing with stock is appreciation and some of the companies pay dividends to shareholders these stocks are known as “blue-chip stocks” and tend to be reliable and able to weather most economic downturns.

There is a difference between a bond and a stock. When you buy a bond, you’re only making a loan, but when you invest in a stock, you’re buying a piece of a company.

The stock market is one place where being young gives you a big advantage over the old folks. The earlier you start investing, the better. A small amount of money invested early is worth more in the long run than a larger amount invested later. It’s not always brainpower that separates good investors from bad; often, it’s discipline, having said that you can reap better in stock if you invest for 20 years plus. That’s long enough for stocks to rebound from the nastiest corrections on record, and it’s long enough for the profits to pile up. 

Stocks are one of the assets that rich people invest in, for instance, Warren Buffet made fortune by buying stocks.

3. Real Estate

Real estate is another type of asset that rich people invest in, talk about Donald Trump, Robert Kiyosaki, Grant Cardone et al they invest in rental properties, that can be condos, commercial properties, office buildings, apartment building/residential buildings, or even land which can be leased out to farmers. Land can be cultivated, developed, or be left unutilized for appreciation.

A residential building is where people live in your properties and pay you rent. The office building is when people hire your property for work and pay you rent. Commercial property is where business uses your space to sell stuff and pay you rent. 

Real estate assets give you rent which is money coming in every month. And they are constantly appreciating.

Don’t confuse real estate with the house you live in again the definition of an asset is anything that puts money in your pocket. Your house doesn’t put money in your pocket it takes money out of your pockets, which is used for maintenance purposes.

4. Bonds

Peter Lynch in his book Learn to Earn said this,

“A bond is a glorified IOU. It’s a record of the fact that you’ve loaned your money to somebody else. It shows the amount of the loan and the deadline for paying it back. When you purchase bonds you’re simply making a loan.

The longer it takes for bonds to pay off, the greater the risk that inflation will eat up the value of your money before you get it back. That’s why bonds pay a higher rate of interest than the short-term alternatives, such as CDs, savings accounts, or the money market.”

There are three ways you can get hurt by a bond;

• The first danger occurs if you sell the bond before the due date, you might make a loss
• The second danger occurs when the issuer of the bond goes bankrupt and can’t pay you back, government, for example, will never go bankrupt—it can print more money whenever it wants.
• The biggest risk in owning a bond is risk number three: inflation. This is because bonds pay at a fixed interest rate.

A bond is when you lend money to the government. When a government wants to raise money for a project they issue bonds for investors to buy. Stock is small ownership of a company while a bond is a debt that a company owes the investor. When you buy bonds you are lending money to the government which will be paid with an interest at a specific time.

When you buy a bond, you know in advance exactly how much you’ll be getting in interest payments, and you won’t lie awake nights worrying where the stock price is headed.

Which is better bond or stock? 

Stock is way much better but the risk is high. Unlike bonds, stocks can keep up with inflation. Bond is slow and can be overtaken by the inflation rate.

Bonds are safer, but they have a low return compared to stocks. 

“Hundreds of successful companies have a habit of raising their dividends year after year. This is a bonus for owning stocks that makes them all the more valuable. They never raise the interest rate on a bond!” Peter Lynch

Bonds are;

• Very stable. 
• Guaranteed a return. Either in one year, two years, five years…
• Low risk
• Smaller in their returns, compared to stocks.

5. Index funds

In Beating The Street legendary Peter Lynch, said if you can’t do research invest in an index fund. 

Warren Buffett advocates for index funds! In one of his annual letters to Berkshire Hathaway shareholders, Buffett wrote:

My advice to the trustee could not be more simple: put 10 percent of the cash in short-term government bonds and 90 percent in a very low-cost S&P 500 index fund. (I suggest Vanguard’s.) I believe the trust’s long-term results from this policy will be superior to those attained by most investors—whether pension funds, institutions, or individuals—who employ high-fee managers. It’s been reported that Buffett gave LeBron James the same advice.

Index funds are boring and effective because building wealth isn’t about gambling. Erin Lowry, author of Broke Millennial advised people to invest in an index fund when opening their first retirement account.

“. . . The best way to own common stocks is through an index fund.” Warren Buffett

It is easy to invest in index funds

Andrew Hallam, author of Millionaire Teacher said, 

“Buying an actively managed mutual fund is a loser’s game when comparing it with buying index funds. Financial adviser doesn’t want you to invest in an index fund so he/she will show you some funds that have beaten the stock market indexes over years but don’t buy it. 

The easiest way to build a responsible, diversified investment account is with stock and bond index funds. To give yourself the best possible odds in the stock market, low-cost index funds are key.

Learning how to beat the vast majority of professional investors is easy: invest in index funds.

Investing in index funds is a way to statistically ensure the highest odds of investment success”

“I believe that 98 or 99% – may be more than 99% – of the people who invest should extensively diversify and not trade. That leads them to an index fund with very low costs.” Warren Buffet

“Index funds are better than stock and mutual funds. They are easy, efficient way to make a significant amount of money. Wall Street guys are afraid of index funds because is better than stocks. When you invest in an index fund you have to invest in multiple funds to create a comprehensive asset allocation.” Ramit Sethi, I will teach you to be rich

6. Digital Products

A digital product is anything that is sold online that has no physical form and can be distributed repeatedly without the need to replenish inventory; it can be a pdf, Mp3, mp4, videos, ebook, Web site templates, software, plug-ins et al. Many successful people are now investing seriously in digital products. Billionaire Ray Dalio has a digital product titled, Principle, Grant Cardone- The Millionaire Booklet, Raymond John-The Power Of Broke, Donald Trump- How To Get Rich, Robert Kiyosaki- Unfair Advantage….and so many others. 

The are several advantages of having digital products;

• It is easy to make money while you sleep
• Flexibility no shipping cost incurred, and accessible 24 hours.
• Lower overhead cost
• High-profit margins
• Cheap to produce, you just need to work on a single product and you can sell it to millions without depleting it. 

According to Shopify E-learning is the future of education. You have a massive opportunity to expand your business and impact with e-learning, an industry expected to be worth $374 billion by 2026.

7. Commodities

Fidelity tells us that commodities are raw materials that are either consumed directly, such as food, or used as building blocks to create other products, while the balance defines a commodity as a product that is traded in bulk. These products can be natural resources or agricultural products.

Commodities are sold by the companies that produce them and bought by companies that use them. Commodity goods are raw materials. 

The Motley Fool gives us several types of commodities as follows;

Types of commodities

Investors break down commodities into two categories: hard and soft. Hard commodities require mining or drilling to find. Soft commodities are grown or ranched. There are four main types of commodities.

• Agricultural products: Soft commodities. They include crops like coffee, corn, wheat, soybeans, cotton, and lumber.
• Livestock and meat: Soft commodities. They include live cattle, beef, pork bellies, and milk.
• Energy products: Hard commodities. They include crude oil, natural gas unleaded gasoline, propane, ethanol, and coal.
• Metals: Hard commodities. They include precious metals, like gold and silver, and industrial metals, like copper, aluminum, and palladium.

There are several ways to invest in commodities. According to Investopedia commodity-hungry investors can consider investing directly in the physical commodity, or indirectly by purchasing shares in commodity companies, mutual funds, or exchange-traded funds (ETFs)

You can invest in hard commodities like crude oil by purchasing stocks in oil companies, crude oil mutual funds, or even exchange-traded funds (ETFs). See how to How to invest in commodities, you can read the advantages and disadvantages of investing in commodities at the Fidelity website.

8. Currencies

Currencies are the money used by different countries to handle transactions. Investing in currency is different from other forms of investing but is a good option for those who want to reduce risk by diversification. Many rich people buy and sell foreign currency, which lets them invest in foreign currencies.

One of the reasons why currencies are assets that rich people invest in is diversification. The other reason is that investing in currency there’s a low barrier to entry. Rich people don’t just invest in their countries they invest in other parts of the world as well. 

Investing in currencies like any other investment involves risk, especially during volatile economic times.

The most popular way to invest in currencies is by trading currencies in the forex. You can read Currency Investing — How to Do It, Pros & Cons of Trading Different Types.

Conclusion

Those are some of the key assets that rich people invest in, there might be other types of assets but those are what many rich people invest in. If you know other common assets that rich people invest in let us know in the comment section. Read more articles here.