The wealthy insist that their money work for them. They utilize their money to make more money. The wealthy want the money they deposit in the bank to draw interest. But they do not view the interest the bank pays as an investment. The same holds true for CDs. CDs are not an investment. To the wealthy, CDs and bank deposits are nothing more than a place where they keep their money until the money can be truly invested in a much more profitable venture.
Wealthy people invest in stocks. They study the stock market and do not depend on hot-tips or touted stocks. Discipline and management are vital aspects of their stock investments. Their risk of loss is low because they buy cheap and sell high, and they accomplish that through sound information and research.
The Money Times, November 2008, reported that rich executives bought the following stocks: Allscripts-Misys, which yielded a 52-week return of 73.1%. Cincinnati Financial, which yielded 25.8% at the end of 52-weeks. Dow Chemical, which provided a 52-week return of 35.2%. Exelixis, which returned 62.9%, and Fortune Brands, which returned 50.4%.
Wealthy people invest in bonds, using the interest from the bonds to purchase luxury items. Which means they never have to touch the principal. Whereas the average person buys a new car, dipping into his principal for the down-payment and paying interest to the finance company.
Wealthy people invest in real estate, the kind of real estate that makes money. Assets such as commercial properties, apartment complexes, and rental houses. They borrow the money to buy the properties, which provide tax deductions. The money collected from tenants pays off the loan. The investor makes a nice profit. For the wealthy person, the mortgage is an asset and not a liability, because the wealthy person uses the mortgage as a financing system to make money, which he uses to buy more real estate.
Of course, with the collapse of the housing bubble, borrowing the money to purchase properties has become more difficult. Mark to market accounting made banks reluctant to make loans because the banks would lose money. Then in early April 2009 the Financial Accounting Standards Board suspended mark to marketing accounting. This maneuver did not change the reality of the situation. Home prices are still too high and wealthy investors know it. So they simply changed tactics.
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