Dubai: The number of millionaires, as well as the size or their wealth, continues to expand each year. As of 2014 alone, some 920,000 individuals joined the millionaire population. Today, there are 14.6 million people who have $56.4 trillion in assets. That’s more than three quarters of the global gross domestic product (GDP) last year.
But where do they put that huge amount of money?
The world’s millionaires, those who own $1 million (Dh3.6 million) or more in assets, have the bulk of their wealth held in equities and cash, according to a survey among 5,100 high-net-worth individuals (HNWI) in 23 major markets across North America, Latin America, Europe, Asia Pacific, the Middle East and Africa.
The biggest chunk of the millions is invested in equities, making up a little over a quarter (26.8 per cent) of the holdings, according to the World Wealth Report 2015 by Capgemini and RBC Wealth Management.
Rich people keep an almost equal amount (25.6 per cent) in cash and deposits, mainly because they want to maintain their lifestyle or ensure financial security.
Another 18 per cent of the holdings is placed in real estate, while 17 per cent goes to fixed income and 13 per cent goes to alternative investments.
The report, which went out in June, also showed that while the rich have a lot of cash to burn, they use other people’s money to expand their wealth. Apparently, borrowing money is not only popular among the average-income or low-income communities.
Even among the rich, credit plays a huge role in ensuring they take some gains off the table, with a significant portion (18 per cent) of HNWI assets financed through borrowed funds.
“HNWIs are mostly turning to credit as leverage for investment opportunities or to invest in real estate,” the report said.
Demand for credit, however, varies by region and demographic. The wealthier, younger individuals (under 40 years old) from the emerging markets are the ones borrowing more.
There’s also a slight change in the way the rich people are investing their money these days. It used to be that the millionaires mostly kept their assets in cash, but equities have recently taken the lead, implying that the ultra-wealthy are now open to take more risks.
The difference, however, is not that huge, with equity holdings growing only by 2 percentage points, and cash dropping slightly by 1 point.
When asked why they still hold on to cash, 35.1 per cent of the millionaires said they intend to maintain their lifestyle, while 30.7 per cent said they want financial security. Rich people from Japan keep the highest amounts of cash to meet lifestyle needs (38.7 per cent), followed by North American HNWIs at 37.3 per cent.
