The secret for optimal asset protection: strategies of wealthy people

In the same way that to play basketball, you need to watch Michael Jordan, or to play soccer you need to watch Lionel Messi, if you want to protect your money you have to learn wealth building strategies of the rich. Although it may seem counterintuitive, the secret of wealth doesn't lie in the ability to generate money but in how to protect it and manage it. If you're wondering “how do wealthy people protect their money”, here is an interesting piece describing healthy asset protection secrets that will help you whether you have 10,000 or 10 million dollars in the bank.

Establish a trust or foundation 

If there's a word that cries out prosperity and describes the financial habits of wealthy individuals, this word is “trust”. In this sense, the foundation works the same way. Even though they have differences, both structures are based on the principle of separating assets from their original owner. 

The concept of the trust is closely related to wealthy people, and it has its origins in Roman law, however, its most solid basis is to be found in England. In a way, we can say that the modern trust was originated here.

The structure’s name speaks for itself as it's based on trust. One of the parties will transfer his/her assets to another party for their administration. If we consider this it is no wonder that the trust is one of the best investment strategies of millionaires, more specifically, one of the best asset protection secrets. If you're wondering “how to protect my money”, a trust or a foundation will be the way to go. Moreover, here you can secure more than money: real estate, companies, works of art, jewelry, gold, etcetera. 

After its creation, the structure of the trust has reached new horizons becoming quite important in countries like Mexico and France. It adapted to different shapes and features especially when it comes to the requirements to become a trustee. 

Strategies of wealthy people: diversification

Diversification is another way of saying “never put all your eggs in one basket”. Any expert on asset protection or wealth management will tell you that this is one of the key aspects to consider. Let's find out why diversification is one of the financial habits of wealthy individuals. 

No investment is perfect in the same way that no economy is 100% stable. The United States is known as one of the largest economic powers but since they abandoned the gold standard, they keep the value of their currency by simply printing more. The only reason why The US dollar is so strong is common consensus. 

In the same way, all investments are unpredictable and there's no better example than the collapse in 2020 due to COVID-19. Nobody expected that large players like airlines and oil companies would experience such a hard time. On the other hand, food businesses, online services, and pharmacies thrived. 

Also, investing in cryptocurrencies can be seen as a good way to protect your money and portfolio, however, this type of investment can give you good returns but also great losses. The same is to be considered when it comes to currency and countries. 

If you're wondering how to get wealthy, the first thing you need to establish is a smart diversification plan which must include different assets. Ideally, a good portfolio must be formed by:

Stocks and bonds

These are the assets that will make your portfolio interesting. The intricacies of the stock market are many so, so if you want to apply the investment strategies of millionaires make sure you do your research. While it's possible to hire a broker, he/she must be highly reliable. Probably until you find one, you'll need to learn these asset protection secrets by yourself. Also, in order to find a good broker, you need to know your stuff to get to know one. 

Bank fixed-term deposits 

Fixed-term deposits can be a good alternative, especially with strong currencies. However, with this approach, you'll be erring on the side of conservation rather than expansion.

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Real estate

If you're willing to invest time and do your homework you can get high returns fast through real estate. In our opinion, the best profits are seen when buying distressed assets, after which you can remodel, repair, and resell to earn interesting capital. Rental income is also an option however, you should carefully assess maintenance costs and fixed expenses to see if the numbers make sense. Which approach you choose depends entirely on your preference.

Gold

Wealth-building strategies of the rich include the king of investments. Gold wins the round in the long term. Although some currencies may present advantages over gold at some stages, this precious metal has proven to maintain and increase its value throughout the years. This is a must in every investor's portfolio.

Crypto

Being highly volatile, crypto is to be approached carefully. Since it can bring you important benefits it's always convenient to allocate 5% of your portfolio here. If you're a risk taker you can stretch it to 10% but more than this is not recommendable. 

How do wealthy people protect their money through a second passport 

Although this is not a how-to-get-wealthy tip in and of itself, it has everything to do with the nomad capitalist’s lifestyle. To conduct business, find the right opportunities, and catch the best investment wave you need freedom of movement. This is exactly what a second passport can bring you, for example, in any of the Caribbean programs.

Disclaimer: this article must not be considered as asset protection or financial advice. These principles were laid out by the editorial team and intend to show a general view of wealth management and asset protection. Before making any investment or financial decisions consult with a certified professional in the corresponding area of business.

Get a convenient tax residency and optimize your taxes

Finally, all these structures must fall into a clever tax plan. Just getting a property or making deposits anywhere you like won’t work. Some countries apply extreme taxation while others are keeping the tax haven spirit alive. Paying zero taxes is virtually impossible due to operative reasons and legislations like CRS or BEPS. However, it is possible to reduce the tax burden to the minimum and, most importantly, to do it legally. We have stressed several times that avoiding taxes is not a solution but a problem as it may take you to fines, higher taxation, and even jail. Depending on how global your strategy is you may need to establish tax residency in a territorial taxation country like Panama. Thanks to this move you will be able to organize your affairs conveniently. However, keep in mind that tax residency doesn't exempt you from paying taxes in the country or in other jurisdictions. If you have any questions about this, check out our article on Myths and Truths about Panama tax residency.

Embrace strategies of wealthy people with Mundo

A common misconception is that people have money and then change their mentalities but it's actually the opposite. Even with six figures a year, you can start applying these concepts and you’ll make the best of your income. In many cases, it's a matter of getting the ball rolling and thus achieving one's financial goals. It's worth noting that a financial goal doesn't have to be necessarily to become a millionaire. There are many spaces in between where you can live the lifestyle that you want according to your needs, expectations, wishes, and desires. Mundo, with professionals specialized in several areas of business, can help you along the way. Just contact us and we'll give you a hand.

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