November 29, 2022

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World Finance Reviews

3 Facts About Typical Millionaire Portfolios From Financial Planners

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I want to become a millionaire one day. While I’m nowhere near that happening, I’m eager to quit financial mistakes that pull me further away from that goal, like overspending on frivolous items and not having an investment strategy. I also want to understand proven strategies other people have done to grow their net worth over the years.

Since I don’t personally know many people who are millionaires and a lot of the advice you search for online seems generic, I decided to ask three financial advisors to spill the secrets behind their real-life millionaire client’s financial portfolios. Here’s the breakdown that each of them shared. 

1. Their investments have a 70% stocks and 30% bond ratio 

Nick Coleman, a financial planner with Bonfire Financial RIA, said that when he looks at some of his millionaire clients in a broad stroke, he notices that many of them are at the top or end of their careers. That’s why their usual portfolio breakdown looks the way it does.

Coleman says his clients are likely to have about 70% of their investments in stocks and 30% in bonds. When it comes to cash, they are likely have below $100,000. 

“Most clients want to grow their wealth and prefer to have high investment allocation and low cash allocation,” said Coleman.

When it comes to home equity, Coleman said that it usually makes up less than half of his clients’ net worth. Many prefer not to not even count their home as part of their net worth, and instead just focus on assets.

Additionally, he suggests that clients typically have about 3% of their assets in alternative investments like gold, digital assets, and commodities.

“As a disclaimer, everyone’s situation is very different and requires an expert advisor to understand your situation and goals [in order] to create and optimize a strategy unique to every client,” said Coleman. 

2. Some are heavy on real estate and diversified securities 

Cynthia Meyer, a CFA and financial planner, sees some of her millionaire clients taking a different approach. 

The breakdown she gave for a typical millionaire client’s portfolio includes about 35% to 60% of their investments in real estate, and the remaining 40% to 50% in diversified securities portfolios.

“These millionaire clients also typically hold $200,000 to $300,000 in cash reserves,” said Meyer. “They have no debt, other than mortgages, and they are not big on lifestyle spends.”

Meyer added that these clients typically save and reinvest 25% to 35% of their net income into retirement accounts or more real estate investments. 

3. Many are heavily invested in retirement accounts, with smaller amounts in other portfolios and cash

Andrew Herron, a financial planner and one of the founding partners of Stone Pine Financial, says a typical millionaire client for them has between $1 million and $5 million in net worth, excluding the equity in their home. 

He said that most of his millionaire clients have about 70% of their assets in retirement accounts like IRAs, 401(k)s, and Roth IRAs. Another 25% or so will typically be in different investment accounts, and then they will have about 5% in cash reserves.

“Our typical client has between 60% to 70% of their retirement and investment accounts diversified throughout the stock market and 30%-40% diversified throughout the bond market and other stable value investments,” added Herron.