When you’re a celebrity, you have access to enormous funds. If you’re a financially sound person, you can put that money into investments that will last you for a lifetime.
Unfortunately, this abundance can also create a false sense of security, prompting you to spend excessively. There are a lot of cases of irrational spending ranging from rapper MC Hammer to boxing legend Mike Tyson.
Celebrities are always a few steps ahead of us regular mortals. Here are some of the ways they invest their money.
- Utilizing real estate
Real estate is usually considered one of the safest investments. This is especially true when you buy condos or plots in highly populated metropolitan areas. Having a parking lot in LA during the 80s or 90s would provide massive revenues nowadays.
Basically, you can do a lot of different things with real estate. You can buy plots of land in areas that you believe are going to thrive in the future. Just imagine how rich you would be if you bought land around Dubai! Alternatively, you can buy old, dilapidated houses and turn these properties into apartment buildings (if the regulation allows it).
Unfortunately, not all celebrities will be that lucky. Some of them will barely make ends meet as they approach retirement, forcing them to take a reverse mortgage.
With a reverse mortgage, you can mortgage your home for money, and the lender will have to pay up as long as you’re alive. This would help you survive hard times. If you want to know how the concept works, make sure to check this mortgage calculator by All Reverse Mortgage.
Most of you have watched Shark Tank. It is an awesome show that can teach you a lot about finances and investments. In fact, I bet that many people would love to have that position of power.
Investing in companies is similar to any other investment. However, to do it right, you need to have some basic financial knowledge. You should also understand a particular industry you would invest in. Placing money blindly in a company would lead to a fast bankruptcy.
As you can presume, most celebrities have a limited understanding of business. Although they might understand basic finances and investing, they probably don’t know much about other industries aside from their own. So, they have financial advisors that would accompany them to these meetings.
One of the things where celebrities are really efficient is when they’re helping other companies and individuals working within their industry. This is where their knowledge can shine and when they can make some really awesome investment decisions (even without the support of financial advisors).
Going with stocks and hedge funds
Some celebrities start investing in stocks as soon as they have their first major break. These financial assets should be the true reflection of a company’s value but can also represent various macroeconomic events in the country. Unlike angel investments, purchasing stocks pertains to acquiring assets that are already listed on one of the major US financial markets.
Hedge funds are a type of mutual funds. Various investors will pool their money and place it into the hands of savvy investors. Then, the investor will create an advanced portfolio consisting of various assets. It is worth noting that hedge funds require a hefty initial investment. Regular investors can’t even consider them because of the high barrier to entry. As such, they are much more popular among celebrities.
Cryptocurrencies are all the craze nowadays. If you ask any financial advisor, they will tell you that these investments are quite risky. Among others, this is because they are not yet properly regulated, and they carry numerous uncertainties.
However, it is hard to dispute how easy they are to use. Cryptocurrencies could potentially eliminate the need for physical cash. In that regard, they are very similar to services such as PayPal, where everything is done online, in a digital form.
Celebrities not only invest in crypto, but some of them sponsor their development.
Investing in their own business ideas
Unlike 40, 50 years ago, nowadays, a lot of celebrities eventually turn into business people.
Truth be told, sports, music, and film industries are very flimsy, and one day you can be on the top and the next day, on the bottom. This is why it’s so important to have long-term plans. You have great examples of Puff Daddy, Jay-Z, and Gwyneth Paltrow, who started earning big bucks after becoming entrepreneurs.