The Rich List

I came across the world wealth report by Capgemini and Merrill Lynch which is a compilation of insights to High Net Worth Individuals (or simply 'the rich list')

High Net Worth Individuals ("HNWI") is defined as those having investable assets of $1million or more, excluding primary residence, collectables, consumables, and consumer durables from their report.

In the 2010 report, the headlines includes HNWI allocating more asset to fixed income instruments, North America being the single largest home to HNWI and Asia-Pacific's continual increase which has surpass Europe. One of my observation is that most HNWI are diversified across equities, fixed income, real estate, cash and alternative investments (including collectables). The concept of diversification seems to run consistently across HNWI in various geographical regions.

However, Rome is not build in a day. The question that got me thinking is how did they build up their portfolios? My logical answer is that besides inheriting a lump sum of money (windfall gains), be the CEO of a huge company, or a famous pop star, the majority of these individuals are people like you and I.

Assuming that HNWI are active investors, their strategy must have started with one asset (e.g. equities security, term deposit or investment property) and accumulative more and more assets through time.

In my opinion, the concept of diversification or 'not putting all your eggs in one basket' is not something you apply at the start of your investment journey. Instead, it is more efficient to focus on a particular asset class and progress to another through time. Efficiency is achieved through knowledge and understanding of what you are investing.

It may seems like a lot of work but I firmly believe in being actively involved and taking control of my investment decisions . Alternatively, you 'play it save' and put your money in a diversified funds just like everybody else. That said, there's a reason why the rich are getting richer; and the poor are getting poorer