It has always been the promise and hype of the investment sales world that people get rich by buying equity investments. A new study by The Harrison Group finds that of the 930 million Americans who have more than $5 million of net worth, only 10% of their money came through passive investments like the stock market and only a further 10% of their money was inherited. Most people who have acquired this level of wealth did so by having a dream and taking the risks of pursuing it. They created something themselves and were actively involved in its management. 80% either started their own businesses or worked for small companies that saw explosive growth. Almost all of them made their fortunes in big lump sums after many years of effort.
Many wealthy people used the stock market as their exit strategy selling their company or their shares to the public market or to another larger firm as their big liquidity event. This is how most receive their lump sum wealth. But once obtained, protecting the capital from big. bold risks is key. Those with less money see the stock market as their hope for riches, business owners see the stock market as an attractive exit strategy. Ideal timing for the entrepeneur is to sell their business to the market when profits have been strong and valuations are toppy. Conversely this tends to be percisely the time of greatest risk for the passive buyer. From strong hands to weak. Buyers of passive investments must be aware of this fact, and they must have their own unique discipline about how to use the markets to their benefit.
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