Rich Americans are starting to decrease their stock market exposure and move their money into what they see as safer assets amid growing market uncertainty, said Michael Sonnenfeldt, founder of TIGER 21, a peer network for ultra-high-net-worth investors.
Sonnenfeldt views the shift as part of a broader "rotation" where the rich are preferring to preserve their wealth amid market risks. He's bullish on the stock market in the long term, but warned about uncertainty in the short term.
"In the short term, it’s a little choppy waters. People are trying to steady the boat on a rocky road, " Sonnenfeldt told CNBC. "When you’ve created as much wealth, they’re looking to preserve wealth first and foremost and grow it secondly."
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Sonnenfeldt called the approach of prioritizing wealth preservation over growth a "good rule."
"If you can keep what you have, you’ll do pretty well," he added.
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Sonnenfeldt said wealthy Americans are investing in bitcoin and gold as they now think both are "secure assets." He believes people are beginning to see the cryptocurrency as a reliable alternative asset for "tough times," rather than merely a vehicle for speculation.
"Bitcoin as a market is still only a tenth the size of gold, but they both are secure assets in members’ minds. Not everybody believes in it, but those that do are making a big splash," according to Sonnenfeldt.
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The entrepreneur said it's becoming difficult to make "extraordinary wealth" as a stock market investor unless one remains invested for a long period of time. Members of Tiger 21, who must have a net worth of at least $20 million to join, had returns of over 20% but "they could never duplicate those returns" in the stock market, Sonnenfeldt added.
Sonnenfeldt highlighted Warren Buffett's exceptional returns, saying the billionaire has been investing for more than six decades and advises putting money in the S&P 500, knowing few can replicate his success.
"So this divide between being an entrepreneur for five or 10 or 20 years and creating extraordinary wealth, and then what do you do with it? It’s the reason why Warren Buffett has told his heirs to put it in the S&P because even they won’t be able to get the benefit of his track," Sonnenfeldt said.
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