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How Wealthy Americans Invest Their Money

Making money is only one step in your financial journey. Once you create wealth, you need to protect it — and, hopefully, grow it.

While most investors diversify their portfolios with stocks, bonds, mutual funds and exchange-traded funds (ETFs), where do the wealthiest Americans invest? Ultra-high-net-worth (UHNW) people typically diversify beyond traditional options to include a variety of alternative investments.


Where Wealthy People Invest Their Money

There’s no one-size-fits-all formula for investing once you reach the upper echelons of wealth. However, according to a study by KKR, UHNW individuals — defined as those with a net worth of at least $30 million — invest an average of 51% to 54% of their portfolios in alternative investments, including private equity, private credit, venture capital funds, hedge funds, real estate, infrastructure and businesses.1

So let’s dig into these alternatives to understand why wealthy people might choose these investments and consider the potential benefits and risks associated with each.


Private equity and venture capital

Private equity involves investing directly in companies that aren’t publicly traded on a stock exchange. Wealthy investors are drawn to private equity because it has historically delivered strong returns when public equities are down.2

Venture capital (VC) is a type of private equity investing that involves investing in early-stage companies that might not be profitable yet have good chances for high growth in the future.

You typically need to work with a private equity or VC firm to invest in private equity or venture capital. These firms pool money from multiple investors and decide where to invest it.

To invest in private equity, you must be an accredited investor, meaning you have either:


  1. Earn an income of more than $200,000 (Or $300,000 with a spouse) in each of the last two years with a reasonable expectation to earn the same or more for the current year, or
  2. Have a net worth more than $1 million, individually or with your spouse (not including the value of your primary residence).3

You don’t have to be an accredited investor to get started in VC, but the Securities and Exchange Commission (SEC) limits your annual investment based on your net worth and income.4

These investments require significant capital and a long-term commitment — usually no less than ten years — so your money may be tied up long-term.5 Given the uncertainty surrounding the success of the companies invested in, the risk is higher, but the reward can be considerable if those companies grow or are sold at a profit.


Real estate

Real estate tends to make up a large portion of net worth for ultra-wealthy people. According to Visual Capitalist, the most affluent people own four homes, on average, and their primary and secondary homes make up roughly 32% of their total wealth.6

They also invest in commercial real estate by purchasing properties used for business purposes, such as office buildings, shopping centers, warehouses and hotels. Direct ownership of commercial property makes up an average of 14% of their total wealth, while commercial property funds and real estate investment trusts (REITs) claim another 5% and 3%, respectively.

This type of investment can provide a steady income stream through rent and potential appreciation in property value. It also offers tax benefits, such as depreciation deductions. However, commercial real estate requires substantial upfront capital and can be affected by economic downturns, impacting occupancy and rental income.


Tangible assets

Luxury assets like art, jewelry, watches, coins, handbags, wine and rare whiskey bottles represent another avenue for wealthy investors. In fact, according to the Frank Knight 2024 Wealth Report, UHNW investors have roughly 20% of their wealth invested into luxury collectibles.7

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Ultra-high-net-worth individuals — those with a net worth of at least $30 million — invest roughly half of their portfolios in alternative investments.

These assets can appreciate over time and may offer the joy of ownership and status among peers. However, the risks include illiquidity, potentially high transaction costs, and the need for secure storage and insurance. The value of these assets can also be highly subjective and influenced by changing tastes and economic conditions.


Private credit

Private credit accounts for only about 4% of the net worth of UHNW investors, according to KKR. This form of investing involves lending money to companies outside the traditional banking or public markets and earning interest from the loan. Some forms of private credit include:

  • Direct lending. Loans may be secured by collateral, such as real estate, inventory, equipment, or receivables.
  • Mezzanine financing. This type of financing is usually provided to companies that can’t raise adequate capital through traditional loans but don’t want to give up an equity stake in the business. It typically offers flexible repayment terms, allowing the borrower to repay the loan through profits or convert it into an equity interest.8
  • Distressed debt. This type of investing involves buying up the debt of struggling companies at a deep discount. Investors hope the company recovers and repays the debt, restructures and gives them an ownership share, or files for bankruptcy, in which case they get priority repayment.9

The appeal of private credit lies in its potential to offer high yields and regular income payments. The risks include the possibility of the borrower defaulting. Investors who want to get into private credit should also have some expertise in assessing creditworthiness.


Hedge funds

Hedge funds make up roughly 6% of the net worth of UHNW Americans, according to the KKR study.

These investment funds pool money and employ various strategies to generate returns for their investors. They can invest in various assets, including public equities, distressed debt, commodities and derivatives. They may also use leverage (borrowed money), short-selling and speculative investment practices to generate returns.10

Generally, you must be an accredited investor to invest in hedge funds, which are known for their high fees.11 Because they can be highly volatile, hedge funds are best for investors who can provide large sums of capital for long periods and are comfortable with high levels of risk.


Are you interested in alternative investments?

Alternative investments offer new diversification possibilities and the potential to increase your wealth, but each comes with its own risks.

If you’re considering getting involved in any of these alternative investments, it’s crucial to understand their complexities, including the market dynamics and tax implications. It’s also important to consider your risk tolerance.

To find an investment strategy that works for you, talk to a Synovus financial advisor. We can help you choose investments that best fit your unique financial goals.

Important disclosure information

Asset allocation and diversifications do not ensure against loss. This content is general in nature and does not constitute legal, tax, accounting, financial or investment advice. You are encouraged to consult with competent legal, tax, accounting, financial or investment professionals based on your specific circumstances. We do not make any warranties as to accuracy or completeness of this information, do not endorse any third-party companies, products, or services described here, and take no liability for your use of this information.

  1. KKR, “The Wisdom of Compounding Capital,” published February 2021. Accessed September 3, 2024. Back
  2. KKR, “Unlocking Private Equity,” accessed April 9, 2024. Back
  3. SEC, “Accredited Investor,” updated March 5, 2024. Accessed September 3, 2024. Back
  4. SEC.gov, “Updated Investor Bulletin: Regulation Crowdfunding for Investors,” modified December 7, 2023. Accessed September 3, 2024. Back
  5. Catherine Cote, “How to Get Into Private Equity,” Harvard Business School, published September 9, 2021. Accessed September 3, 2024. Back
  6. Dorothy Neufeld, “Visualizing the Investments of the Ultra-Wealthy,” published October 30, 2023. Accessed September 3, 2024. Back
  7. Knight Frank, “The Wealth Report 2024,” Accessed September 3, 2024. Back
  8. Corporate Finance Institute, “Mezzanine Financing,” accessed September 3, 2024. Back
  9. Rebecca Lake, “What Is Distressed Debt? An Investment Guide,” Yahoo Finance, published August 24, 2021. Accessed September 3, 2024. Back
  10. SEC.gov, “Investor Bulletin: Hedge Funds,” accessed September 3, 2024. Back
  11. Jess Linnet, “Hedge Funds 101: What Are They and How Do They Work?” published September 20, 2023. Accessed September 3, 2024. Back