Lessons from the ultra wealthy
They drive flashy sports cars. They vacation at the most exclusive resorts. They wear breathtaking bling on the red carpet. Whether ballin’ like Beyoncé or favouring Gap like Mark Zuckerberg, wealthy people work hard to stay rich.
And that means they are very strategic and disciplined when it comes to their finances, says Tony Maiorino, vice-president RBC Wealth Management Services. With over 20 years of experience advising high net worth clients across Canada, Maiorino has tips for what the rich folks do that everyday investors can use to get themselves in a stronger financial position:
Don’t let your emotions drive your decisions
Whether it’s your music career or your portfolio, you can’t just look at today’s market.
“Sometimes you get ‘group think.’ You’re at a dinner party or in a taxi or on a train talking to people about how something really great or really terrible is happening in the market. You can become pessimistic or optimistic based on what’s going on around you.”
Don’t try to time the market; the aim is long-term growth and capital appreciation. “Getting out is easy, but when do you decide to get back in?” he asks.
Treat yourself like a corporation
If you ran a business, you would be involved in its strategy and growth. More people need to do this with themselves and their money.
“If you own a business and you run that business, you know where every penny is going,” he says. The same goes with your portfolio, whether you manage it yourself or have a broker.
In the case of rich people, “they treat their wealth like a business,” he says. That money is often overseen by a wealth management firm and “that group would be responsible and would report back regularly to the client, as they would to a CEO,” Maiorino says.
Have a strategy
It’s important to have a plan that you can work on with an expert such as a financial adviser.
“Advisors have regular updates with their clients in order to reach their objectives,” he says.
Take advantage of the opportunities when the market dips and reinvest where you can grow, he adds.
“More people need to do this with their wealth and investments – be involved and engaged in your money, and have a plan and a goal.”
Don’t pick investments purely by returns
“Don’t look for opportunities just based on performance – that shouldn’t be the only factor in your investment. You want to work with your adviser on a full plan and set goals together from the very beginning,” he says. It’s important not to get rattled by what’s happening in the market on any one day.
“It really is about time in the market as opposed to timing the market.”
Pay attention to the end
Many people are focused on not losing in the markets, and end up investing too conservatively. Even wealthy people are prone to this mistake.
But then you risk not having enough in savings for retirement or other goals.
“For some, their goal could be that charitable issues are met. For me, it’s working toward a retirement with my wife that we can enjoy and providing a lifestyle that my children can have, being the child of an immigrant family,” he said. “What’s happening in the short term is not the biggest risk to your portfolio. The biggest risk is not getting to that goal at the end.”
Edited on 22 March 2017