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I understand that there are stock markets, and money market funds, etc, but where do most millionaires have their millions?

Do they have, for example, a bank account with millions in it? Like, they go to Bank of America, and withdraw $300.00 from their $10 million dollar account?

Do they have it in the stock market? If so, then what do they do if they sell some stocks? Where does that "real money" end up?

Do you understand what I'm getting at?

I'm asking because I think I'm missing something when it seems like a bad idea to have alot of money in a bank. $100,000.00 and no more is FDIC insured. And it also seems somewhat silly to have all the liquid (?) assets tied up in stocks.

I do understand that some rich people buy homes, expensive cars, and other (mostly) appreciating assets. I'm not talking about that, I'm talking about what happens with the rest of their money.

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I normally just get 10 of these and hide them in various locations around the house....

Change for a Million ?

jimbocobb (Oct. 09, 2007 @ 8:39a) |

I don't know about "we", but I would consider wealthy to mean not having to work. It's okay if you want to continue to w... (more)

Betelgeuse (Oct. 09, 2007 @ 9:10a) |

Assuming no debt, one could just live off the interest on a million. This is certainly true in OH where I live.

chanfo (Oct. 16, 2007 @ 12:18p) |

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I recently had 700k in Countrywide earning 5.65% APY and all of it was FDIC insured:

One Individual Account: 100k FDIC
One 4 family memeber joint account: 400k FDIC
One 2 person Joint with 2 person POD (payable on death) account: 400k FDIC

All these accounts are in different classes of assets and are thus seperately insured by FDIC with no overlapping coverage. In this case, my Countrywide accounts have 900k of FDIC coverage by using my 4 family members.

However, this is not to answer your "where to millionares put there money." I am a simple law student, with a slight positive net worth at the moment, but close to $1 million of free balance transfer debt on my hands I get to invest as I wish for the next 10 months. If I had $10 million right now, and I was 22 years old as I am now:

I would have $5-6 Million in stocks (maybe a little less now with the current situation); 2-3 million in real estate (for living and investment purposes); and about 1 million in liquid high yield savings accounts (so long as interest rates are above inflation).

Also, as you can see in my example, I easily have 900k FDIC at one institution. I could do this at 10 more institutions also, and there's $9 million of FDIC coverage for you right there in holding cash and earning a current 5%+ return. However, I bet most of the truely rich don't bother that much with FDIC limits. They do banking at a few mega corporations, such as Chase, BOA, ect that are not going bankrupt any time soon. So for the most part, thier millions are safe.

If you are talking about people with 100s of millions then my guess would be that government bonds constitute the majority of their "risk-free" way to store money.

Multi-millionares I know are all business owners. Three in dry-cleaning (they do the labor themselves though w/ 80+ hour weeks), One who owns a few gas stations, another runs about 25 gyms. They all have their "money" in their house with HUGE 9-car-garage-type mansions.

All not the fatwallet finance (ie conservative) type.

Essentially, I think they would use a brokerage-based cash management account that has either multi-bank FDIC insurance or is treasury backed, that was likely serviced by either a full-service bank branch or local brokerage branch. For example, BOA MRA or Citi Smith Barney BDP. At least that is what I would do if I needed a "checking" account to hold a few million.

I would imagine beyond their need for a few months worth of expenses, they would have it invested elsewhere, with various cash management products for liquid assets.

trippy said: what do they do if they sell some stocks? Where does that "real money" end up?

Do you understand what I'm getting at?
No, I don't. Try again

MikeR397 said: Also, as you can see in my example, I easily have 900k FDIC at one institution. I could do this at 10 more institutions also, and there's $9 million of FDIC coverage for you right there in holding cash and earning a current 5%+ return. However, I bet most of the truely rich don't bother that much with FDIC limits. They do banking at a few mega corporations, such as Chase, BOA, ect that are not going bankrupt any time soon. So for the most part, thier millions are safe.Mike R, by definition, money in joint accounts is not "yours"; all named account holders would have a legitimate ownership interest in such an account.

Furthermore, there is a much better, and safer, way to invest very large sums, at a market rate and pratically no risk -- look at this discussion for information about T Bills.

trippy said: I understand that there are stock markets, and money market funds, etc, but where do most millionaires have their millions?

Do they have, for example, a bank account with millions in it? Like, they go to Bank of America, and withdraw $300.00 from their $10 million dollar account?

Do they have it in the stock market? If so, then what do they do if they sell some stocks? Where does that "real money" end up?

Do you understand what I'm getting at?

I'm asking because I think I'm missing something when it seems like a bad idea to have alot of money in a bank. $100,000.00 and no more is FDIC insured. And it also seems somewhat silly to have all the liquid (?) assets tied up in stocks.

I do understand that some rich people buy homes, expensive cars, and other (mostly) appreciating assets. I'm not talking about that, I'm talking about what happens with the rest of their money.


Most multimillionaires are business owners, they have their money in their money making machines. If they have free cash and want to diversify their assets, they will seek helps from private wealth management/private bankers.

GS, MS, BoA, UBS, and etc... all provide this kind of service. You can google it and see what kind of service those private bankers provide. As far as I know, they will help you setup an portfolio. The money could end up in stock market, manciple/corporate bonds and private equities.

Multi-millionaires do have checking accounts like you and me. When they need cash, they would ask their bankers sell some of treasury bills or corporate notes they own and transfer those money into their checking account. By doing this, millionaires can make sure they don't put all their eggs in the same basket, their money is protected by countries and big corporations.

They have most of their net worth locked in the form of equity (mostly not liquid). I believe their liquid cash is parked in tax-exempt Money Market accounts.

MikeR,

How on earth did you manage close to 100k BT at 22?

Thanks.

Edit: I meant 1 million. Typo.

kiliman said: MikeR,

How on earth did you manage close to 100kBT at 22?

Thanks.


Try 1,000K BT. MikeR said, "...but close to $1 million of free balance transfer debt on my hands I get to invest as I wish for the next 10 months."

Kanosh said: MikeR397 said: Also, as you can see in my example, I easily have 900k FDIC at one institution. I could do this at 10 more institutions also, and there's $9 million of FDIC coverage for you right there in holding cash and earning a current 5%+ return. However, I bet most of the truely rich don't bother that much with FDIC limits. They do banking at a few mega corporations, such as Chase, BOA, ect that are not going bankrupt any time soon. So for the most part, thier millions are safe.Mike R, by definition, money in joint accounts is not "yours"; all named account holders would have a legitimate ownership interest in such an account.

Furthermore, there is a much better, and safer, way to invest very large sums, at a market rate and pratically no risk -- look at this discussion for information about T Bills.
You are correct that by FDIC definition, the money is not "all" mine (it isn't mine anyway, it is the credit card companies ), but for my purposes I am fully insured. I know the risk of allowing family memebers equal access, but that is not a problem with my family

kiliman said: MikeR,

How on earth did you manage close to 100kBT at 22?

Thanks.
I personally only managed 137k AOR. But I'm managing, and keeping the rewards (as a graduation gift), my parents AOR's. They did much better than I did . All in all, I breached a little over $1,000,000. I'm about 3 months in the AOR and have about $880k still (after minimum payments for 82 credit cards) invested in various locations (Indymac 5.7% CD, SECU ~9.36% (thanks mh83!), and the rest in Countrywide earning 5.65% APY). See here for more details

Its fun to play milliionair and see bank balances that big, but alas I do have to pay those balances back. I've been a student my entire life and have not had a chance to earn any money yet (that is until FW came along). Truth be told, I'm earning roughly the same amount in law school now (not working) as what my job offer's directly out of undergrad were for. Go figure

Of what I remember hearing of after my great grandfather passed away (this was in the 90's back when I was in high school so I didn't pay that much attention, and it's not like I have millions of my own to worry about). I think my parents said he had about 10 mill diversified in the stock market, he had a very large home, nice cars, I think he still owned his business, and I assume like my parents he had various bank accounts that did hold more than the FDIC insured amounts, but because they are large they can negotiate for better than advertised interest rates for those accounts. I know he funded at least one scholarship but I have no idea how that was handled.

There are more millionaires than you can shake a stick at today. A million dollars does not get you far these days. Look at some houses in some areas that are close to a million and ask yourself, those people are millionaires.

mistycoupon said: There are more millionaires than you can shake a stick at today. A million dollars does not get you far these days. Look at some houses in some areas that are close to a million and ask yourself, those people are millionaires. Very true. If you were to retire with "only" one million dollars saved, it is recommended that you not spend more than $30,000 per year in retirement in order to make sure you don't outlive your savings. Better shoot for 2, or 3, or 20.

That's that problem. Those people think that because they live in a million dollar house they are a millionaire. In reality, most of them have huge mortgages, so the bank really owns the overwhelming majority of the house. Here in the DC area, I know tons of people who have little if any net worth and think they are rich because they live in a 900k house and drive a 60k car. Most of them can't afford to drive thier expensive cars or leave thier expensive houses on the weekends because they are all house poor. When they do, they charge these entertainment expenses on the credit cards that they will someday discharge (or attempt to) in the bankruptcy. It's sad really.

mistycoupon said: There are more millionaires than you can shake a stick at today. A million dollars does not get you far these days. Look at some houses in some areas that are close to a million and ask yourself, those people are millionaires.
According to this Article, “There’s the new rich and there’s the old rich. There’s the poor rich and the rich rich.”

I understand that there are stock markets, and money market funds, etc, but where do most millionaires have their millions?

I buy diamonds........

LustfortheMoment said: I understand that there are stock markets, and money market funds, etc, but where do most millionaires have their millions?

I buy diamonds........


Lol I just got in an argument with someone about this today who said diamonds are such a good investment because they never lose value. I said, yeah, they're worth whatever DeBeers decides they're worth. The person thought I was making that up and that diamonds are actually rare. No wonder people can't save money.

I only know two couples that are millionaires for sure.

The first couple is worth a few million and keeps their net worth mostly in stocks and bonds and CD's at a couple of different big name brokerage firms. They do keep some cash in money markets as well. They don't really use any products that your typical FatWallet person wouldn't have access to.

The second couple is worth a few hundred million and keeps their net worth in, among other things, a cruise line and investment real estate.

2Cor521

Obviously, as you amass more $$ you diversify it in different investments, businesses, RE etc.

As for where do the millionaires who read FWF put their cash?

SECU.

SUCKISSTAPLES said: Obviously, as you amass more $$ you diversify it in different investments, businesses, RE etc.

As for where do the millionaires who read FWF put their cash?

SECU.
What a great deal, 9.36%+ APY FDIC, and right after a .5% rate cut too! Too bad it limited the CD to 200k. O well, I've never seen such a good deal before, and most close to it limit the CD to 1k or 7k or so.

I know many very wealthy people with lots of money. No one I know mixes there investment money with the money they use to live off. By this I mean in general they don't buy and sell from there investment accounts to cover there daily living expenses because that is just a bad idea as there is no way to predict what the value of your investment will be on any future date.

To MikeR397 I don't know 1 person who sets up accounts joints accounts with anyone except there wife. I do know a couple very wealthy people with POD set up but they mainly do that at places like Smith Barney using BDP($1.6 Million per POD or joint of FDIC insurance), Merrill Bank Program( $1 Million per Pod or Joint of Insurance), Morgan Bank Partner Program($750k per POD or Joint of FDIC insurance) etc and honestly I know a lot more people who don't even bother with POD's as the wealthy people I am talking about have accounts for $10 million + so getting FDIC coverage even at place like the above is almost impossible. When you have $10 million + liquid net-worth trust me your not going to run around to 10 + banks opening and closing accounts.

To Kanosh most super wealthy people do not buy treasuries for there cash management positions. I don't know 1 wealthy person who buy's T-Bills as MARS, VRDN, VRDO, Commercial Paper, Government Agency discount notes pay either a much higher rate or are triple tax-free or Government Agency Discount notes not only pay a much higher rate but are also state tax exempt. Anyone with a either a Private Bank account or with a brokerage account at a full service brokers has access to all the above cash management instruments which could be AAA rated with insurance which are almost as safe as T-Bill with more liquidity as most of the above instruments have no risk to principle at all vs T-Bills are subject to market rates.

Every wealthy person I know banks or using one of the following banks or brokerage houses. For Banks:BOA, Chase, Citibank or Wachovia and For Brokerage:JP Morgan Chase, Morgan Stanley, Goldman Saks, Smith Barney, or Merrill all of which offer some type of Bank Deposit program using different charter banks offering between 4-5% checking account with $500k-$1.6 million FDIC coverage per named account owner. They keep most of there cash in Cash Management instruments that every full service brokerage house and Private Bank offers to there clients. The only other banks I know some that some wealthy people use is City National Bank and Wells Fargo except everyone I know who is wealthy who banks at either also maintains a brokerage account elsewhere as nether of them have an investment banking division as they are retail/small business/mortgage banks vs other banks listed so they have no access to cash management instruments nor do they have a bank deposit program either and people I know use them solely for banking and maintain there transaction accounts at those 2 banks.

If you have an account at most full service brokerage firms. All of them offer the ability to be linked to any checking account at any bank. I know for example Smith Barney even allows this option. You can set up your Smith Barney account to debit and credit all transactions to and from that checking account and all those transaction go out via same day ACH for all settled funds and debited on day of settlement for all purchases. Or you can set up your account to manually move the money when requested and all transfer go out via same day ACH as long as they requested by cut off time which is 1pm EST. People I know who bank at either City National Bank or Wells Fargo have a brokerage account set up with one of the above 2 ways linked to there checking accounts at those banks except I don't know anyone using Smith Barney that way but I do know people using Goldman and Jp Morgan Chase in Ca that way.

I'm not sure exactly what those with 5+ million do, but I would just set up a 60/40 allocation and have the dividends and capital gains thrown off into a money market fund with check writing ability and linked to a checking account for flexability. Probably with Vanguard, and a BOA checking account. Taxes might get funny, but who cares? It shouldn't be to bad as long as I hold on to the funds that are throwing off the dividends, capital gains, and interest and don't sell those.

S-bank accounts are good for millionaires or billionaires. Private W-Management acoount requair $2million -$10 Millions dollars to open.

You are right! Most multimillionaires or billionaires not the fatwallet finance conservative type. Most multimillionaires or billionaires are business owners, we have our money in our money making machines.If we have free cash and want to diversify ours assets,we will call our private wealth management/private bankers.

You could always take the Suze Orman route:

"I buy zero-coupon municipal bonds, and all the bonds I buy are triple-A-rated and insured so that even if the city goes under, I get my money. I take a little lower interest rate to make sure my bonds are 100 percent safe and sound."

billionaire18 said: You are right! Most multimillionaires or billionaires not the fatwallet finance conservative type. Most multimillionaires or billionaires are business owners, we have our money in our money making machines.If we have free cash and want to diversify ours assets,we will call our private wealth management/private bankers.
who is we? we want to know

My family

billionaire18 said: My familyWe finally have a billionaire in our FWF family.

dolmar said: ...
To Kanosh most super wealthy people do not buy treasuries for there cash management positions. I don't know 1 wealthy person who buy's T-Bills as MARS, VRDN, VRDO, Commercial Paper, Government Agency discount notes pay either a much higher rate or are triple tax-free or Government Agency Discount notes not only pay a much higher rate but are also state tax exempt. Anyone with a either a Private Bank account or with a brokerage account at a full service brokers has access to all the above cash management instruments which could be AAA rated with insurance which are almost as safe as T-Bill with much liquidity as most of the above instruments have no risk to principle at all vs T-Bills are subject to market rates.
Dolmar, good post. A quick search on the web shows that VRDN means Variable Rate Demand Notes and VRDO Variable Rate Demand Obligations. Mind sharing with us what MARS is?

quickfingerz said: Multi-millionares I know are all business owners. Three in dry-cleaning (they do the labor themselves though w/ 80+ hour weeks), One who owns a few gas stations, another runs about 25 gyms. They all have their "money" in their house with HUGE 9-car-garage-type mansions.

All not the fatwallet finance (ie conservative) type.


I actually see the opposite. I know a log of guys with well over a million in assets. They still buy stuff on eBay, fat wallet, and craigs list. They buy reasonably nice cars (~50k or so) but don't go overboard and negotiate fiercely on the price. They are very careful on every dollar that flows out of their hands. One of the guys I know just bought a new house and walked away from three deals prior because they wouldn't go low enough on the price. In the end he spent $700k on the house, but makes around $300k per year.

I also know a lot of people that live well above their means. We call these the "$30k milli's"

dolmar said: Every wealthy person I know banks or using one of the following banks or brokerage houses. For Banks:BOA, Chase, Citibank or Wachovia and For Brokerage:JP Morgan Chase, Morgan Stanley, Goldman Saks, Smith Barney, or Merrill all of which offer some type of Bank Deposit program using different charter banks offering between 4-5% checking account with $500k-$1.6 million FDIC coverage per named account owner.
The wealthy couple that I know bank with Wachovia and have their investments at Fidelity. Their investments are all in stocks picked by the husband whose "job" is managing their stock portfolio. They find my rate chasing amusing, as the returns are so pitiful compared to what the stock market offers. I even tried to get them to do the SECU offer, as they live in the DC area, but they just couldn't be bothered to drive to the branch. However, the wife figured they may as well have a high interest checking account since their checking account at Wachovia earns little to no interest. They've been solicited to join private banks but were wary [the reasons were, if I remember correctly, that they felt that the cost of PB services outweighed their benefit and/or they felt that the point of PB was for the PB to become the trustee of their estate, and they didn't want to be bothered about that]. Do you suggest anything that would work for them?

beethovengirl said:
The wealthy couple that I know bank with Wachovia and have their investments at Fidelity. Their investments are all in stocks picked by the husband whose "job" is managing their stock portfolio. They find my rate chasing amusing, as the returns are so pitiful compared to what the stock market offers. Do you suggest anything that would work for them?

They seem to be doing good so why try and change them? Their way is more the norm, We are the wacky ones. Funny how BoA keeps trying to sell me on their services by telling me how much easier it would be if I went with them instead of chasing rates. They just don't get it that I like the game.

scott1961 said: beethovengirl said:
The wealthy couple that I know bank with Wachovia and have their investments at Fidelity. Their investments are all in stocks picked by the husband whose "job" is managing their stock portfolio. They find my rate chasing amusing, as the returns are so pitiful compared to what the stock market offers. Do you suggest anything that would work for them?

They seem to be doing good so why try and change them? Their way is more the norm, We are the wacky ones. Funny how BoA keeps trying to sell me on their services by telling me how much easier it would be if I went with them instead of chasing rates. They just don't get it that I like the game.

Well, I dunno...the wife did say she was interested in getting a higher interest checking account. I can understand why they wouldn't want to bother with the rate chasing, but they actually live very frugally. They could be making thousands more in interest with a modicum of effort, and I'd rather they switch bank accounts than have the wife fix their roof if they want to avoid spending money. And, I'm close with their son, and they're grateful for my efforts to get their son signed up with his employer's 401k matching program [I succeeded there] and to get him to sign up for the AAA BofA account [I failed there, but then again, seeing all the difficulties people have getting BofA to calculate the interest correctly, I may as well just let it go]. In college, I had to teach their son how to write and deposit checks.

So, assuming it involves a modicum of effort, I don't understand why they don't have higher interest banking accounts.

So, assuming it involves a modicum of effort, I don't understand why they don't have higher interest banking accounts.MMA perhaps ?

Juuust kidding

Kanosh said: dolmar said: ...
To Kanosh most super wealthy people do not buy treasuries for there cash management positions. I don't know 1 wealthy person who buy's T-Bills as MARS, VRDN, VRDO, Commercial Paper, Government Agency discount notes pay either a much higher rate or are triple tax-free or Government Agency Discount notes not only pay a much higher rate but are also state tax exempt. Anyone with a either a Private Bank account or with a brokerage account at a full service brokers has access to all the above cash management instruments which could be AAA rated with insurance which are almost as safe as T-Bill with much liquidity as most of the above instruments have no risk to principle at all vs T-Bills are subject to market rates.
Dolmar, good post. A quick search on the web shows that VRDN means Variable Rate Demand Notes and VRDO Variable Rate Demand Obligations. Mind sharing with us what MARS is?


Municiple Auction Rate Securities which are just ARS issued by Muni vs PARS(issued against closed ended mutual funds) or ARS issued against Corp's.


If you read the "Retail Cash Management" thread on here I explain in detail how these instruments work and there benefits too. How Fidelity offers ARS to retail clients via there web page which include both Muni and Corp based ones.

Skipping 24 Messages...
Assuming no debt, one could just live off the interest on a million. This is certainly true in OH where I live.

Betelgeuse said: aeiouy said: but what level do we really consider wealthy?

I don't know about "we", but I would consider wealthy to mean not having to work. It's okay if you want to continue to work, but you're wealthy when you do not require income from a job to live. Someone having 6 figures in the bank isn't really wealthy if they must continue to work. Although those less fortunate may disagree... if the working man quits with that amount, he may be able to survive off of it for a few years, but will have to go back to work again when it's all gone. The wealthy person, if they have two brain cells, will never be required to work.

Lookup " f**k off money "



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