What Do Billionaires Invest Their Money In?

The vast majority of us will never become billionaires. The math just makes it so improbable. For example, if you earned $3,000 PER DAY post-tax, it would take you 912.8 years to become a billionaire. Almost a full millennium!

To give you a sense of how much a billion is, if you stacked $1 bills on top of each other, one billion dollars would be 67.9 miles high, 125x larger than the tallest building in the world, the Burj Khalifa.

It’s a rare group of individuals who reach this monumental figure, so where do they put their money? What do billionaires invest their money in?

Stocks

Equities are among the most important investment assets for billionaires. In many cases, billionaires are founders of companies and hold large, valuable stakes in their own businesses.

Prominent examples of this strategy include Mark Zuckerberg, Jeff Bezos and Elon Musk. As the respective founders of Meta, Amazon and Tesla, these entrepreneurs have built businesses valued in the hundreds of billions of dollars (or even trillions depending on the day). As such, much of their personal wealth is tied up in their companies.

Other billionaires earn their billions through sheer investment acumen. A prime example here is hedge fund manager Bill Ackman, whose personal wealth is estimated at $3.4 billion.

Warren Buffett also achieved his billionaire status by managing money for others through his Berkshire Hathaway company. Buffett controls more than 30 percent of the company’s Class A shares, making him one of the few men in the world with a net worth in excess of $100 billion.

Like other investors, billionaires can use stocks to allow their wealth to grow over time. Whether by owning shares of their own companies or through investing in others, many billionaires keep the majority of their wealth in productive businesses.

Free Portofino Liguria photo and picture

Bonds

Like most other investors, billionaires also use the bond market to deliver predictable, safe yields within their portfolios.

As people who have already built enormous amounts of wealth, billionaires are often more interested in security or preservation of capital than growth. Bonds offer this security, though they rarely generate similar returns to stocks.

Beyond the government bonds that are widely discussed in investment circles, billionaires can also purchase corporate bonds.

These debt instruments are riskier, but they also offer higher yields than their government-issued counterparts. In some cases, corporate bonds can provide a comfortable middle ground between returns and risk of capital loss.

Real Estate

Real estate is another extremely common asset held by the world’s wealthiest individuals. In this category, we can find both privately held real estate and properties intended to generate income.

Mark Zuckerberg, for example, famously owns some 1,500 acres on the Hawaiin island of Kauai. Zuckerberg has spent well over $150 million on this property. The land on Kauai acts as a private preserve and includes residential real estate, and Zuckerberg derives little to no income from it.

On the other hand, billionaires can also buy real estate for its wealth-building power. Bill Gates has spent the last several years buying over a quarter million acres of US farmland. In addition to gaining value through gradual appreciation, this farmland has the potential to deliver rental and crop income. As such, Gates’ farmland portfolio is more of a traditional investment asset.

Art and Collectibles

Though not as approachable for the average retail investor, fine art can be a decent investment for those with net worths large enough to participate in this specialized market.

One of the most prominent billionaires engaged in art investing is Ken Griffin, founder of the Citadel hedge fund. Griffin’s purchases of Andy Warhol and Jackson Pollock paintings are among the largest art transactions of recent years. On just three paintings from these two artists, Griffin spent a staggering $700 million.

Private Equity

In addition to owning stocks in publicly traded companies, billionaires often allocate capital to private equity investments.

This type of investment has gained considerable popularity in recent years. Between 2019 and 2021 alone, private equity increased from 15 to 20 percent of the wealthiest investors’ portfolios. Many plan to keep adding money to their private equity holdings, though tighter monetary policy and higher inflation may ramp down these plans.

Private equity can offer higher returns than those found in the public stock markets, as well as exclusive business opportunities. Not all billionaires, however, are supportive of the private equity model. Warren Buffett has been an especially outspoken critic, noting that PE funds often rely on high leverage and excessive debt loads.

Mezzanine Debt

Mezzanine debt is a highly specialized and poorly understood type of debt that essentially acts as a bridge between debt and equity.

Mezzanine debt involves a private lender providing additional capital to investors for the purchase of assets using debt. For example, a person who wanted to buy a business but didn’t have enough equity to put up to borrow the money from a senior lender might turn to a mezzanine lender to cover part of the cost.

Mezzanine debt is quite risky, but the returns can be as high as 20 percent annually in some cases. This kind of debt is suitable only for investors with very high net worths, as it requires large amounts of capital and can involve the risk of total loss.

Commodities

Raw materials like metals, agricultural products and oil are historically reliable investments for extremely wealthy individuals.

Commodities can offer protection against inflationary pressures, making them especially relevant in today’s market.

Unsurprisingly, commodities are relatively common investments for billionaires.

Luxury Investments

In some cases, billionaires will buy assets that are more luxuries than true investments. Nevertheless, these assets can still carry enormous values.

These investments can include historic French wineries, exclusive supercars and even mega yachts. These luxury assets tend to be highly illiquid and are mostly for their owners’ enjoyment.

Foreign Currencies

Although the foreign exchange market is extremely volatile and famously risky, some billionaires have made their fortunes operating in global currencies.

One prominent example is George Soros, whose fund made a historic and enormously profitable bet against the British pound in 1991.

Foreign currencies make up a smaller part of many billionaire portfolios, as they provide protection against macroeconomic challenges for the US dollar.

Cash

Like anyone else, billionaires require a certain amount of cash to pay for day-to-day purchases. It’s interesting to note, however, that the average billionaire keeps only about 1 percent of his or her net worth in cash. This is likely because cash is a largely unproductive investment that is highly susceptible to inflationary pressures. As such, it is the most likely investment to lose value over time.
 
As you can see, many of the items on this list are accessible to the average investor. While you may not be able to buy a French Chateau or an Andy Warhol, you can buy many of the same stocks, bonds and real estate investments that allow billionaires to build and maintain their wealth.

#1 Stock For The Next 7 Days

When Financhill publishes its #1 stock, listen up. After all, the #1 stock is the cream of the crop, even when markets crash.

Financhill just revealed its top stock for investors right now... so there's no better time to claim your slice of the pie.

See The #1 Stock Now >>

The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.