Yesterday I received a WhatsApp forward of the Forbes’ Real Time Billionaires List featuring the world's top 10 wealthiest people. For the uninitiated, Forbes’ Real Time Billionaires List is based on the value of the person's stockholding and assets on a real-time basis.
Later over a casual chat with my friend Rohan who had forwarded me that WhatsApp message I asked him “What do you think is the reason behind this unparalleled wealth owned by these people?”
Rohan replied, "It is obviously because all these people own immensely successful businesses".
"That's partially true," I told him. However, there is another reason too, why these wealthiest people in the world are getting more and more rich day by day. Apart from running immensely successful businesses, they also invest in other businesses through equity investments.
Let’s consider the case of Bill Gates, the founder of Microsoft Technologies.
With an estimated net worth of $113.1 billion, Bill Gates is the second richest man on planet earth. In terms of wealth, Bill Gates ranks second only to the CEO of Amazon, Jeff Bezos, who has an estimated wealth of $185.5 billion. Gates is followed by Bernard Arnault, CEO of LVMH, the world's largest luxury-goods company with an estimated wealth of $112 billion.
Most people who have used a personal computer at some point of other in their life would have probably used a computer with a Windows operating system developed by Gates owned Microsoft Technologies. If you ask any person about what could the reason behind Bill Gates wealth, like Rohan’s answer the most common answer would be “After all, he is the founder of Microsoft Technologies”.
By any chance did you think the same? However, the reality is something different.
In 1994, the net worth of Bill Gates was just $5 billion. Today it is worth $113.1 billion and growing by the second. And the reason for this phenomenal growth in his fortune can be attributed to his equity investments.
Bill Gates actively invests in companies through his firm known as Cascade Investment, which is handled by chief investment officer, Micheal Larson.
According to publicly available information, Bill Gates has significant investments in stocks of companies across diverse sectors, with smaller portions in private equity and other so-called alternative assets.
Some of his significant equity investments include stocks in Warren Buffet's Berkshire Hathaway, the Canadian National Railway Company, Waste Management Inc, Walmart Inc and Caterpillar Inc. etc.
Despite giving away more than half of his investments to charity, the wealth of Bill Gates has only grown more and more thanks to his wise decision of investing more than 60% of his wealth in stocks.
In a television interview in 2019, Bill Gates was quoted saying “We’re not, you know, in some defensive posture where we’re mostly in cash, or anything like that. “The strategy that’s been used on the investments is to be over 60% in equities.”
Two valuable takeaway lessons from Bill Gates success in equity investments
Equity investments have the power to make you super-rich
Despite being a successful entrepreneur with massive revenue streams, Bill Gates realized early in life about the power of equity investments to multiply wealth at an unparalleled rate. When even the ultra-wealthy have no second thoughts about the power of equity investments to increase their wealth, shouldn't most ordinary investors also invest in equity to increase their wealth?
If you lack the expertise in equity investments, don't hesitate to seek professional help
Bill Gates was a tech wizard. His mastery in technology ensured that he created built of the most successful tech business empires from scratch. However, this did not mean that he would have done equally good as an investor. That explains his wise decision to hire the services of a profession money-manager Michael Larson who has since 1995 delivered a compound annual return of around 11 per cent.
As an equity investor, if you have been consistently making losses or unable to make significant gains till date, its high time that you should hire the services of an expert.
The experiences of succesful people offer great lessons for those who wish to replicate their success. Click here if you wish to read another wonderful and inspiring lesson for equity investors.