How do Hollywood stars invest their money?
Making big money comes with a big responsibility and even a headache sometimes. Whether you are a big celebrity or a person who has saved a lot there is an order to financial planning that makes sense.
Cash is king: The first obvious place is liquid savings, this is the “just in case” money. Whether you are a celebrity or not, unfortunate things happen to all of us. It’s important to stash some money where it can be quickly used for obstacles and opportunities that life brings.
Real Estate: The next place is somewhere with long term results. A recent survey found the top investment for celebrities to be real estate. Obviously, the most expensive real estate that celebrities usually invest in is their home and perhaps houses they may buy for their parents or kids. Next to that is income property which will help increase your net worth and income over a long period of time.
Mutual Funds and Stocks: Believe it or not celebrities have a very minor amount of their money in mutual funds and stocks as these are investments that have too much change and maintenance for the person who is busy working and making money. In addition, most busy people like celebrities do not have enough time to educate themselves with the number of details one needs to know in order to be a profitable stock investor. Therefore this is an area that is less used by celebrities in general.
Private Equity: this is ownership in a business that is not traded on the stock market. This seems to be a big attraction for many celebrities because it is exciting and can make a lot of money if it ever pans out. Most private equity deals are highly risky and don’t result well. So why do celebrities enjoy them? For one, as you amass a lot of wealth, you will have many people approach you with many crazy ideas. One reason celebrities invest (and lose) a lot of money in private businesses is that they are pressured by friends and colleagues. Lady Gaga, Justin Bieber, Ellen DeGeneres, and Madonna all have been known to invest in private businesses. Madonna just invested $1.5 Million in Vita Coco a coconut water company.
Art: As you grow your wealth it’s imperative to diversify among different asset classes. Art is a popular investment class among celebrities because it is not only a commodity that has long term stability and value but it also has “show off appeal”. This makes it a very popular investment for those in the spotlight.
Annuities: One of the secrets of Hollywood are annuities. Ever wonder what happens when a celebrity is no longer popular and generating income? Well, some of them go broke, but the smart ones have tons of money stashed away in annuities that will generate them income for as long as they are alive. For example, Tony Robbins who is valued at around $480 Million has a significant portion of his money in Fixed Index Annuities which he writes about in his new book called “Money: Master The Game”. I believe it is important to create a well-diversified portfolio when it comes to creating and maintaining wealth. That is why my financial planning services always revolve around creating a wealth structured around the security and growth of your money.
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