The truth about wealth inequality

According to inequality.org, the richest 1% own 45% of the world’s wealth, and that the global wealth inequality has either been rising or staying extremely high nearly everywhere around the world. Wealth inequality is a concept that is crucial to understand to analyze the gap between the percentiles. The major question is, how can the gap be bridged?

Are you aware of what is wrong with this picture?If not, you’re probably someone whose investment portfolio looks like the bottom 50% of the percentile. This chart expresses the way in which assets are distributed within each wealth percentile. It can be observed that the top 1% has a much more spread out proportion of assets and as the wealth percentile goes lower, real estate becomes the asset that is the most prevailing. A large sum of your earning might be contributed to one big investment, which may be a home. When the market value drops, you’re essentially losing a lot of money, because your investment and risk are both highly concentrated in just one asset, with a low amount of diversification involved.Diversification of income and assets is vital for the sustainability of your wealth, even if you belong in the 1% of the wealth percentile, because you could lose the money just as you’ve accumulated all of it if you are not careful with what you do with that money. The wealthy don’t do anything special with their earnings, other than living frugally for some part of their lives as they save money in order to invest in assets. They don’t just invest in assets, but diversely spread out their investment in order to stay low on risk. If one investment doesn’t work too well, they could just turn to another since they are still earning regardless of happens with one investment. If all of your money is tied up in one investment as seen in the bottom 50% percentile, you’re essentially going to lose a lot of money if that investment is not fulfilling for you. This concentrates the risk in just one property, and can cause a great prospect of halt in the preservation of capital or returns for the future. It can also be noticed that their consumer durables are more in number because of how those individuals might impulsively buy appliances that they think that they need, when in fact it might have been a want in the spur of the moment. It is common that the top 1% of wealthy people say no to most things merely because they believe that it is a want rather than a need and put it off for a while unless it’s absolutely necessary to be purchased, which is why the percentage of consumer durables is so low for them.Portfolio diversification can be done in a few different ways – it can either be across different asset classes or diversification within an asset class — investments being spread across within the same asset class. It isn’t a surprise that real estate has become the fastest growing and largest class in the world, considering that people from emerging countries actively seek homes and saving vehicles. The income generating capacity of the asset makes it an advantageous investment for people who are looking to save either for a more flexible retirement or for the future generations. Even when it comes to the returns in the present, real estate doesn’t disappoint as it provides a steady flow of income if your real estate investment portfolio is well diversified over a period of time. With attention to wealth inequality, Smart Crowd is building a smart solution towards potentially bridging the gap between the top 1% and the rest of the 99%. Investing is something that is essential for growth. Just like how we invest in ourselves to educate ourselves formally, it is also important to invest to educate ourselves financially and attaining experiences which can bring uplift us in the distant future. The reduced risk factor that comes from purchasing a share of property and being able to spread out the risk by investing in small fractions of other properties can be of immense benefit as a whole. Investing in the largest asset class in the world is slowly but surely becoming more accessible, but it is up to you if you want to take the steps towards the direction of growth.

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