Millionaires Make a Return To Boom Levels
|June 25, 2010||Posted by Roshawn Watson under Uncategorized|
By: Roshawn Watson
The number of millionaires rose by 16-16.5% in the U.S. and increased by 14% worldwide in 2009, depending on which report you use; this level of millionaire households was last seen in 2007. Interestingly, this increase occurred despite contraction of the world gross domestic product (GDP). The primary reason for the increase is due to stock market rallies. Consider that the global stock market capitalization surged from $32 trillion to $47 trillion in 2009, so shareholders benefited enormously.
The wealth was still highly concentrated. By far, the U.S. has the greatest number of millionaire household ranging between 3.1 million households (14th Annual World Wealth Report) and 4.7 million households (2010 Global Wealth Report). Americans account for 31% of the millionaire households. Over 50% of the world’s millionaires came from the U.S., Japan, and Germany. Singapore had the highest millionaire density, with 11% of all households having over $1 million in net worth. For the first time, the high net worth individual (HNWI, investible assets over $1 million excluding primary residences, luxury goods, and private businesses) population in Asia-Pacific was as large as that of Europe. Despite sizable gains in Europe, these gains were far less than growth in the economic and market drivers of wealth in Asia-Pacific. The ultra-high net worth individuals (investible assets over $30 million excluding primary residences) had a 21.5% rebound in wealth in 2009. Note that ultra-high net worth individuals account for 35.5% of global wealth HNWI wealth and makes up only 0.9% of the HNWI population.
With the plethora of bad economic news, such as Will the Economy Collapse in 2011?, bad housing and unemployment news, and the market correction of May, it is easy to forget or at least discount the fact that if you were an investor throughout in 2009, you likely had a good year overall. This is especially true if you increased your exposure to emerging markets in Latin America and Asia. Also, keep in mind that the more money you have, the more difficult it is to determine your true net worth in many cases. For example, valuation of private companies can be very complex, and the opinions often disagree depending on which method you are using. Thus, after a particular point, net worth becomes somewhat arbitrary anyway.
If you can actually count your money, then you’re not a rich man. (J. Paul Getty)
Additionally, don’t forget who the average millionaire is. Remember that the typical millionaire is not a Wall Street titan, a corporate fat cat or a celebrity but rather a hard-working entrepreneur (32%) or professional (19%). Moreover, even though both the 14th Annual World Wealth Report and the 2010 Global Wealth report rightfully exclude primary residences in determining HNWIs, keep in mind that approximately 97% of millionaires are also home owners. Typically, millionaires have small outstanding mortgage balances and only approximately 25% paid $1 million or more for their current homes. Millionaires typically save and invest 15% of their earned income, which only represents 7% of their total net worth. In other words, frugality is a common tenet amongst millionaires. With good money management, investing skills, a long enough time frame, and a reasonable income, several of us will likely enter the millionaire ranks as well. Thus, this recovery in wealth reflects a rebound in wealth for many more hard-working, tax-paying Americans than it does jet-setters. That’s simply because millionaire jet-setters are in the minority of the millionaire population.
The Rich Get Poorer
Copyright 2012, Roshawn Watson, Pharm.D., Ph.D. All Rights Reserved.