Invest Like the Super Wealthy

2% of the investors in the world’s markets cannot ever sell their shares because their ownership is critical to the value of the companies they own. They cannot sell because selling would drive the share price down and simultaneously trigger a massive capital gains tax. They also do not need to sell because as they generate enough income from their assets to pay for all their living expenses. In this way, they own shares for generations. This is how the Walton family created a business dynasty. The Walton’s never sold their Walmart shares and are the wealthiest family in the world long after Sam Walton (the founder of Walmart) passed away. The Walton children and the family trust own about 50,33% (1,485 billion shares) of Walmart, generating an annual dividend of $3,14 billion without selling a single share.

 

The people in Forbes Top 20 Billionaires all started, or own, companies that own brands like Amazon, Microsoft, Louis Vuitton, Zara, Oracle, Facebook, Google, Bloomberg and L’Oreal, to name a few. They are wealthy because they have assets that generate an income, negating their need to work or sell assets to survive.

 

The 70%

70% of people invested in global markets do so through their pensions and savings. They rely on a monthly salary as their primary form of income. Every month a portion of their salary is deducted to contribute to a pension fund or savings, in many cases their pensions are their only form of savings. Pensions are a forced form of saving stopping people spending all their money.

 

Pension Funds and other institutional investors invest these savings in shares traded on stock markets around the world. According to Bloomberg, in 2017, institutions owned 78.1% – 80.3% of the large index funds and they held between 70% and 85.8% of the ten largest companies on the US stock market.

 

So, the 2% own shares in great companies which provide them with an income. They intend never to sell their shares.

 

The 70% have their forced savings in pension funds that are buying and selling shares all the time. The fees and rules in pension funds, means that they can only make returns through capital growth, that is through buying and selling shares. The research company Morningstar estimates average mutual funds buy and sell over half their holdings every year.

 

This means that 70% of people invested in global markets never build up a dividend income to live off, once they retire they need to sell their investments in their pension funds in order to create an retirement annuity for income.

 

The 70% also tend to be indebted. Most of this debt relates to Education, Accommodation, Transport and Health. Borrowings make them more vulnerable to economic downturns. If they lose or change jobs they are often forced to liquidate their savings to cover their debts.

 

AXIAM clients and the remaining 28% of global investors?

AXIAM clients are part of the remaining 28% of investors in global markets. We are not super wealthy, yet, but we know how to win. We buy shares in companies that own great brands and have no intention of selling these investments. We understand building wealth means buying assets and holding on for a long time. We generate income from dividends and in the short term, we use the dividends to buy more shares in the companies we analyse when prices decline.

 

We behave like the 2%, and buy companies based on the value of their cash flow and analyse free cash flow very carefully to ensure companies we own can maintain their free cash flow.

 

Our companies continue to grow their free cash flow during market downturns because they have brands that are desired and have low debt to equity ratios.

 

At AXIAM, our goal is to turn our clients’ current capital into an annual dividend over time by using these principles. We have spent many years growing wealth inspired by the wisdom of great investors. We buy shares in companies that own great brands that are known, loved and used around the world daily. We intend to hold, and ideally never sell, the assets we buy. Sign up for our newsletter to learn more or contact our fund management team to invest.