It can take a lifetime to build a fortune of Buffett or Dalio sized proportions. But, as all billionaires know, there is always risk present in the market — and even though a catastrophic geopolitical or financial event is very unlikely, it is important to be prepared for anything.
Let’s take a closer look at the actions that these billionaires are taking, and why they are so concerned in the first place.
Most billionaires are surprisingly cash poor on a relative basis. The average billionaire only holds 1% of their net worth in liquid assets like cash because the vast majority of their fortunes are usually tied up in business interests, stocks, bonds, mutual funds and other financial assets.
Wealth is not stagnant, and the portfolios of these billionaires will move along with the health of the economy and markets. This can either make their wealth flourish — or any market crash could damage their entire fortune.
For this reason, billionaires are very concerned about market fluctuations, and they actively seek ways to protect their wealth even in the wake of a catastrophic geopolitical, economic or monetary event.
Keeping the above points in mind, billionaire investors are positioning their portfolios accordingly.
By accumulating massive amounts of cash in Berkshire Hathaway, value investor Warren Buffett has preserved his optionality. If a downturn hits the market, he can deploy the cash and get assets at bottom barrel prices.
The billionaire founder of Greenlight Capital believes that financial repression and monetary debasement employed by central bankers can be neutralized with gold.
PAUL TUDOR JONES
The reclusive hedge fund manager, who called the 1987 crash, is being very careful in choosing the assets he holds. He has observed bonds are the most expensive they’ve ever been by virtually any metric — and has joked that he’d rather hold a burning chunk of coal than a U.S. Treasury bond.
The founder of the world’s largest hedge fund is adamant that 5-10% of a portfolio should currently be held in gold. Not surprisingly, in November 2017, Bridgewater loaded up on its gold holdings by 525%.
No matter the size of your investment portfolio, it’s worth studying how the world’s most elite investors are protecting their fortunes. By hedging against big events and diversifying their investment portfolios to include safe havens, they maximize their chances for success in any investment environment.
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