Investments, Luxury lifestyles, Personal finance

Guess Who’s Becoming Risk-Averse?

Notice how some young, wealthy individuals are claiming fewer bragging rights and becoming more frugal? A greater number of Millennials are adopting more risk-averse behavior.

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A high percentage of individuals in this group, ranging from 18 to 34 years old, are gravitating to more conservative, financial investment vehicles and strategies compared to older investors, according to last year’s Merrill Lynch Affluent Insights Quarterly

survey, which questioned a sample of 1000 affluent Americans with investable assets of more than $250,000.

“It is understandable that younger investors who have experienced or witnessed the market swings during the past decade and the impact they may have had on their family would be skeptical about more moderate or aggressive investment strategies,” said Sallie Krawcheck, president of Bank of America Global Wealth and Investment Management in the survey’s press release.

Now, more wealthy parents emphasize financial “know-how” to their children. According to the review, two out of five respondents are spending more time speaking to their children about financial matters, and 74 percent have shared some form of the advice offered from their advisor, such as managing a budget, investing for retirement and managing checking or saving accounts.

Avoiding financial investments or taking a more conservative approach at a younger age can damage the asset growth sought during the long-stretch, warned Krawcheck. “It is our job as advisors and as an industry to help restore investor confidence so that risk aversion doesn’t leave the next generation of investors inadequately prepared for the future,” she advised.

How have you noticed wealthy individuals show risk aversion with their investments?

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Investments, Luxury lifestyles, Mortgages, Personal finance

Luxury Rentals: Making “Sound Investments”

Real estate agents reveal more uber-rich Americans are renting instead of buying homes.

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In New York, rentals of $10,000 to $100,000 are on the rise, according to the New York Times. The luxury market there has been the slowest to recover from the housing market collapse. Brokers told the paper it appeared buying was not a “sound investment” to wealthy New Yorkers at this time, and it’s likely they didn’t want to put, “35 percent down on an apartment when its resale value still comes with a big questionable market.”

The upsurge in luxury renting is boosting profits for companies, such as Corporate Mansions. Owner Bill Lyons’ business multiplied from the distressed properties and vacant homes near the Las Vegas Strip in Nevada’s ritziest neighborhoods. Lyons’ business rents luxury properties to wealthy executives and A-list celebrity clientele for thousands of dollars per week. He and his team arranged deals with banks for homes and then resurrected the property, he told the Las Vegas Business Press. Lyons added that he hopes to sell the homes, but he’s waiting and creating a revenue model that will work until the market picks up.

Affluent Americans are living more modestly and are looking for more value for their dollar. Six figure income-earners even led the “coupon enthusiast” frenzy during the recession. “In fact, more affluent households dominate coupon usage: 38% of “super heavy” users and 41% of “enthusiasts” come from households with incomes greater than $70,000,” according to The Nielsen Company’s Nielsen Wire blog entitled, “The Coupon Comeback.” “Households with income of $100,000 and up were the primary drivers of coupon growth in 2009,” it said. The wealthy Americans, American Express found, have also been gulping down more fast food.

Many of these Americans experienced a rapid decline in their fortunes during the recession. Increased investments in stock and real estate prior to the economic decline were among the culprits. These acquisitions exposed them to the nasty fluctuations in the overall market. Many found the financial shock a cathartic experience. They learned that their financial reserve was not as secure as they once thought.

The economic recovery is enabling affluent Americans to grow their wealth the same way they lost it, Jonathan Parker, a professor of consumer finance at Northwestern University told The Street. Towards the end of 2010 the luxury goods market saw more activity as the wealthy incurred more frequent first-class flights and stayed at high-end hotels.

Do you think it is better to rent or own a home? Why?

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