The Stay Rich Portfolio (or, How to Add 2% Yield to Your Savings Account)
In 2012, Eike Batista had an estimated worth of more than $35 billion.
The self-made Brazilian billionaire created an empire that stretched from mining to oil to public works. Many considered him the pride of Brazil.
Barely two years later, he had lost all $35 billion…and owed another $1.2 billion to creditors.
How does this happen? How does a $35 billion portfolio evaporate practically overnight?
You could point to several poor decisions, but perhaps the biggest of all was concentration risk (and Buffett’s favorite destroyer, leverage). Batista’s wealth was overwhelmingly tied to the global commodities boom. While that investment concentration was a huge tailwind in helping Batista become rich, it eventually proved his downfall as well.
This points to a critical takeaway every investor needs to be aware of…
The portfolio that helps you get rich isn’t necessarily the portfolio that’s going to help you remain rich.
Research has shown that 70% of wealthy families lose their wealth by the 2nd generation, and a whopping 90% by the third generation. Granted, some of that is due to high spending, addiction, bad luck, leverage, or just poor decisions. But a lot of it is how people invest their money. Can you invest in a certain way to bombproof your portfolio to minimize losses?
In this piece, let’s do what Batista should have done – spend a few minutes focusing on the “stay rich” part of the equation. If you’re an investor who has already amassed great wealth and “won the game” what’s the right market approach that will help you keep (and potentially even grow) your wealth?