June 21, 2024
Investment

4 Places Where Millionaires Invest Cash To Safeguard Their Wealth


FatCamera / iStock.com

FatCamera / iStock.com

There are several approaches millionaires can take when it comes to putting their money where it can grow over time. Do you know which options are best for building your wealth?

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GOBankingRates spoke with John Jennings, president and chief strategist of St. Louis Trust & Family Office, and Stephanie Lo, Ph.D. and vice president of research at NDVR, to learn more about where millionaires should invest their cash.

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Cash-Like Investments

Jennings works with families with net worths in the $100-million-plus range. He said he advises clients to keep at least one year of expected portfolios in cash.

However, what Jennings said he means by cash are investments that meet the following three criteria:

Here are a few examples of investments Jennings said meet these criteria:

  • Deposit accounts at banks. These include savings accounts and money market deposit accounts.

  • Cash in a brokerage account, typically swept into a bank account overnight.

  • Money market mutual funds purchased through a brokerage account.

“Periodically, we evaluate the yields on these various cash products and move client cash so we maximize the after-tax yields,” said Jennings. He cites money market mutual funds as an example of a cash product that generally yields more than deposit accounts or cash in a brokerage account.

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Short-Term Treasuries and Certificates of Deposit (CDs)

Jennings also utilizes short-term treasuries and certificates of deposit (CDs) to earn yield on monies that don’t need to be available for withdrawal on demand.

“If a client were to sell a business today and will owe income tax on the sale in April of 2025, we’d likely invest the amount of expected tax in a Treasury Bill that will mature shortly before April 15, 2025,” said Jennings.

Risk-Balanced, Diversified Portfolios

Lo said a non-negotiable option for millionaires that want to safeguard their wealth is a well-diversified portfolio. However, millionaires also look to build a risk-balanced portfolio, too.

High net worth clients, Lo said, have hyper-personalized portfolios built for them. These include:

  • Unique allocations of stocks and bonds

  • Futures

  • Options to improve diversification

  • Risk-return profile of the portfolios as a whole

“Portfolios like these not only help millionaires protect their money, but if customized appropriately to the investor, can help ensure they can live the lifestyle they want, into retirement and beyond,” said Lo.

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This article originally appeared on GOBankingRates.com: 4 Places Where Millionaires Invest Cash To Safeguard Their Wealth



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