We all know about those wealthy families who have somehow been able to ride out the worst market crashes in history, whose status among the wealthy elites almost seems to come from a connection to royalty. But the wealthy families I’m talking about aren’t royalty. Here in the U.S. we have never been under the thumb of royalty, yet there are still families like the Rockefellers and the Vanderbilts whose wealth and prominence in America has been sustained over a number of generations.
So how do they manage it? And, more importantly, how did they amass their giant fortunes in the first place?
The answer is all about how they invest their wealth – wealth meaning here the total assets held by a particular family – and where they keep their money.
To begin with, let’s start with how these elite upper class families came to be. John D. Rockefeller, the founder of the Rockefeller clan, came from modest origins. His father was a lumberman and a traveling salesman. His mother was a homemaker who gave birth to six children, with John D. being the second of the bunch. She struggled to maintain a good home for her children, but John D.’s father didn’t make that easy: amid his frequent career changes and general shady business practices (he dabbled for a time in selling self-made elixirs) he also carried on a second life and was a bigamist. John D.’s father had a number of nicknames, including “Big Bill” and “Devil Bill.”
Hardly the most auspicious start for a budding billionaire, right?
But John D. Rockefeller did indeed make billions, mostly from oil. He also founded the University of Chicago and the Rockefeller University. In his time, he amassed such a large fortune that even today, the Rockefellers have an estimated worth of $663.4 billion, more than John D. ever made in his own day. He passed away in 1937.
How did they manage to grow their wealth? I’ll get to that in a second.
First, let’s have a look at the beginnings of the Vanderbilt family: Cornelius Vanderbilt brought the family great wealth from his shipping and railroad empires some 200 years ago. Today, the family is still one of the wealthiest in the country. You probably recognize the names Gloria Vanderbilt, the fashion designer, and Anderson Cooper, the television journalist. Mother and son, both descendants of good old Cornelius Vanderbilt.
Again, how did this family manage to not only hold onto their wealth through the generations, but even grow it?
The answer comes from where they invested their money.
They didn’t play the stock market. They don’t own large portions of publicly-traded conglomerates. In short, they don’t invest their wealth in so-called “currency markets.”
They invested their wealth in tangible investments: real estate, art, hotels, factories, vehicles, and the like.
These super elite families try and steer clear of intangible investments such as stocks, bonds, patents, and trade marks. These things are subject to the whims of the market and government regulations and can make even the savviest Wall Street trader lose a fortune in the blink of an eye. The Fed can flood the market with trillions of dollars and devalue the dollar, almost to the point where the paper is worth more than the money printed on it. What good is a government bond then? What happens to your wealth when your stock portfolio is cut in half?
Real investments, tangible investments are not as vulnerable. After all, no matter what the market does to real estate prices, owning a high-rise on Manhattan’s Fifth Avenue is always going to be a solid investment. These are investments that have been proven over the course of time to not only hold their value, but increase their value, too.
If you’re an investor looking to make a fortune in the short term, the stock market is an excellent place to begin. But if you’re the rare breed of investor who wants to make secure the financial futures of the generations of your family that will come after you, plan on.