Tip from the rich: don't tie up money in a home: the affluent look to financial markets--not real estate--to grow wealth.

Author:Tisdale, Stacey
Position:INVESTING
 
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IF YOU ASK MOST MIDDLE-CLASS PEOPLE WHAT'S the best way to grow money, many will tell you it's through homeownership--particularly when it comes to passing on generational wealth.

When it comes to wealth building, however, different saving and investment habits between the classes may be worth a closer look. The rich keep only a fraction of their wealth in their homes, while the middle class have the bulk of their net worth tied up in residential real estate.

New York University economist Edward Wolff found that the wealthiest 1% of Americans have only 9% of their gross assets in their personal residences, while nearly 30% is invested in financial securities such as stocks and mutual funds. The rest is in business equity and other real estate investments. In contrast, the study found that the middle class have nearly two-thirds of their wealth in their residences.

Further down the wealth chain, a TIAA study called the Affluent Investor Barometer found that 63% of survey participants with at least $250,000 in investable assets say stocks offer the most opportunity to grow their wealth, with real estate a distant second at 12%.

Shelly-Ann Eweka, a certified financial planner with TIAA, says one of the reasons the wealthy have a a different portfolio mix is because they tend to work with financial advisers. The TIAA survey also found that 60% of affluent investors use an adviser compared with 39% of the general population.

"Financial advisers will recommend that their clients maintain a diverse portfolio in addition to homeownership. Financial advisers will work with their clients to make sure their portfolio is well-diversified, which includes several asset classes--stocks, bonds, real estate, and cash," says Eweka.

Changing attitudes about where to park wealth can be challenging for blacks due to long-standing conditioning and experiences that equate homeownership with wealth and success.

"Owning...

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