What separates mega millionaires from those with a mere $25 million to invest? Read on.
What separates mega millionaires from those with a mere $25 million to invest? The ability and willingness to take risks, according to a new Millionaire Corner study on the attitudes and behaviors of America’s richest investors.
All millionaires – whether they have $1 million or more than $125 million to invest – credit their wealth primarily to hard work, followed by education and smart investing, according to ongoing studies of affluent investors conducted by Millionaire Corner. Attitudes toward building wealth begin to diverge when it comes to attitudes toward frugality and risk.
The wealthiest investors – those with a net worth exceeding $25 million – count taking risk as one of the top four factors contributing to their financial success, and rank “being in the right place at the right time” as number five. Frugality places sixth, and is cited as a secret to success by 63 percent of mega millionaires.
High net worth investors, who have amassed $5 million to $25 million in investable assets, place much more weight on frugality as a wealth-building strategy. Frugality ranks as the fourth most significant factor, followed by being in the right place at the right time and taking risk. (Non-millionaires with investable assets of $100,000 up to $1 million place an even higher premium on frugality, ranking it as one of their top three wealth-building factors behind hard work and education.)
“Frugality, or mindful spending, frees up more money for investing and is obviously an important component of building wealth,” said Catherin McBreen, president of Millionaire Corner, “but the wealthiest Americans appear more comfortable putting a portion of their assets at risk in order to earn a higher investment return. To these sophisticated investors, managing investment risk is even more important to preserving and growing wealth.”
Mega millionaires look for annual returns associated with more high risk investments, according to our newly released $25 Million Plus Investor 2012. More than one-fourth (28 percent) looks for an annual return of 6 percent to 8 percent, while 62 percent look for a return of 9 percent or better, including 11 percent of mega millionaires who expect an annual return of more than 25 percent.