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Strategies for Building and Preserving Wealth: 5 Essential Habits of High Net Worth Investors

Mae Franco
Mae Franco
September 28th, 2023
Elegant businesswoman discussing investment strategies on a yacht deck, exemplifying the long-term vision and wealth preservation methods of high net worth investors

Investors are free to spend money as they choose, but statistics tell us that some financial habits are more effective than others. If you want to build and preserve your wealth, adopting the right financial habits is crucial.

Laying the Foundation: Why Habits Financial Matter

If you’re aiming for the kind of flexibility and earning power that high net worth investors enjoy, it might be time to assess the habits you practice surrounding wealth and wealth preservation.

It’s one thing to have capital to play with—it’s another thing entirely to use in a way that helps it grow exponentially over time. There are also social and legal factors to consider. In this guide, we will look closely at five habits of successful investors and why they’re so important for growing wealth.

Financial Habits That Drive Success

Investing may be a passive way of making money, but that doesn’t mean it can happen independently. There is a significant amount of planning, strategy, and skill behind the world’s most successful investors, and many share the same financial habits.

From diversification to knowing your tax brackets, there are many different approaches you can take toward strengthening your investment game. Here are the top five on our list:

1. Embracing Social Responsibility in Investments

illustration of a sustainable business value chain highlighting positive environmental impact, emphasizing the importance of social responsibility in investment choices

When people think of high-level investments, “social responsibility” isn't usually the first to come to mind. But investing in an ethical and socially conscious way is not only more common than you’d think but also more effective than you’d expect.

High net worth investors place significant value on environmental, social, and governance (ESG) factors.

In fact, a recent survey found that nearly 80% of high net worth investors want the companies they invest in to take responsibility for their social impact.

Furthermore, 52% of high net worth investors have investments in, own, or work for companies that integrate ESG policies. Investing in social responsibility is important to big investors because it shows dedication to future-oriented business plans and laws.

2. The Art of Wealth Preservation

Wealth preservation requires that you take a multi-prong approach to investing. High net worth investors will always protect their assets from a myriad of risks, including inflation, market downturns, taxes, and lawsuits.

Putting this protection in place requires having adequate insurance, creating an estate plan, and diversifying your portfolio.

Below are some of the investment options that high net worth investors currently focus on:

  • Stock and bond funds
  • Real estate
  • Dividend stocks
  • Crypto
  • AI and ML companies
  • Value stocks
  • Target Date Funds
  • Roth IRA

As part of preserving your wealth, you should invest in multiple companies and assets to ensure that your portfolio is diverse enough to withstand any fluctuations or market shifts. By doing so, you can preserve your wealth and survive any changes.

3. Tax Efficiency: The Unsung Hero of Investments

The more money you earn, the more complex your taxes can become. However, this requires that you know exactly how to file your taxes and what rebates you're eligible for.

You’ll need to learn, understand, and organize your tax affairs, and you must develop strategies to increase your net worth by minimizing taxes and maximizing returns. There are several different ways to approach this, depending on the investment.

For example, investors can create and operate trusts subject to different taxation than ordinary investment accounts. There’s also the option of investing funds from a cash value life insurance policy as the total amount of the policy’s premiums is not taxable. Additionally, investors who buy and sell property often use a 1031 exchange to ensure capital gains taxes are deferred. This is wholly legal and sanctioned by the IRS.

However, the only way to ensure you get the maximum benefit is to cultivate a deep-reaching knowledge of taxes or hire a professional financial analyst to do it for you.

4. The Timeless Wisdom of Spending Less and Investing More

It’s a simple method that works whether you’re earning $3,000 a month or $3 million. The less of your monthly or yearly salary you spend, the more you can save and reinvest into other projects, assets, or businesses.

Take regular, hard looks at your margins and make sure you aren’t overspending when you could be reinvesting to generate more wealth. When your investments start paying off, it can be tempting to indulge in excessive spending, but it’s not necessary, and it won’t push your investment career any further.

It’s also important to ensure that you maintain a certain amount of liquidity in case of an emergency or other financial obligation arising unexpectedly.

You need to assess the risk of every investment and have enough liquidity to cover unforeseen costs without incurring debt or penalties. There’s no point in investing every cent extra if you lose money when the need to access funds unexpectedly arises. Employing a proper risk management strategy helps you to maintain liquidity and retain control over your capital.

5. The Foresight of Long-Term Investments

Many smart investment strategies simply involve thinking ahead and making future-oriented decisions. Long-term investments are usually the ones that bring the highest returns, so you want to position yourself in a way that caters to those kinds of investment opportunities.

Short-term investments are an appealing choice because the turnaround is quick. They’re also an easy way to test the market initially. Options like free stock trading in Canada are a good place to start to get a feel for different markets and to learn how trading works. You can then extend your short-term trades as you become more comfortable and confident.

In the long run, it’s long-term investments that will really push you into the stratosphere of high net worth investors across the globe.

Climb Your Way To The Top With The Right Strategy

Businessman strategically moving a chess piece, symbolizing the calculated decisions of high net worth investors focused on building and preserving wealth through diversified investments and long-term planning.

Having access to significant wealth and financial opportunities is one thing. But using those resources in the right way can mean the difference between real growth and loss.

Having a strategy for how you’re going to use, save, invest, and spend your money is key to helping it grow over time. Some of the wealthiest people in history have squandered their funds due to poor planning or a lack of understanding about how these systems work.

If you want to become a high net worth investor, you need to adopt the right strategy. Don’t waste your time guessing and following fleeting trends. Utilize what you learn from fellow investors and seek out guidance from a mentor or peer with more experience than you.

By adopting these healthy financial habits, you can grow your net worth slowly but steadily over time, thus growing your wealth and reaching or exceeding your financial goals.

The Bottom Line: The Roadmap to Amplifying Your Net Worth

When it comes down to it, sustainable, high-return investment is about strategy and a good relationship with money. You need experience, connections, capital, and discipline to amplify your net worth.

With these tried-and-tested financial habits of the world’s wealthiest investors, you can develop a more succinct and sustainable plan for growing your wealth. Be socially responsible, diversify your assets, be tax conscious, and think ahead. The rest is up to the economy.