It’s been a rough year for high net worth investors. And they’re starting to act scared with their money.
High net worth individuals, people with investable assets of $1 million or more, dumped their stock exposure in 2023 by 6 percentage points to 23% — the largest annual drop since 2008 amid a serious financial crisis, says a new Capgemini World Wealth Report.
And what did the rich load up with instead? Cash. High net worth investors boosted their cash positions by 10 percentage points — the greatest jump of any asset class — to 34%. That’s wealthy investors’ largest position in cash since at least 2002, Capgemini says.
This is an important shift. It signals wealthy investors are opting for the perceived safety of cash — especially given that 5% risk-free returns are possible in just plain savings accounts. And the rich are willing to give up on the growth of stocks in exchange. Cash is now the largest position in their portfolios.
“Clients are more conservative during uncertain times, with priorities focused on preserving wealth through diversified investment strategies and an eye to the future,” said James Dunlop at ANZ Australia, a bank, in the report.
High Net Worth Individuals Rough Year
It’s time to break out a violin for the world’s richest people.
High net worth individuals’ wealth dropped 3.6% coming into 2023 versus the previous year, Capgemini said. That’s the largest drop in high net worth coffers in the past decade. And the drop off was an even steeper cliff in North America. High net worth individual’s wealth plunged 7.4% on the continent, which remains the richest in the world. Massive drops in tech stocks like Amazon.com (AMZN), Tesla (TSLA) and Zoom Video Communications (ZM) were to blame.
The drop also had to do with slowing global economic growth, stubbornly high inflation and rising interest rates. Global economic growth slowed to 3.2%, half of its 6% rate in 2021.
And wealthy individuals retrenched to hang onto what they have. More than two-thirds of high net worth individuals prioritized wealth preservation as a goal…