Since 2021, Richard Branson has lost half his fortune due to stock market volatility. Richard Branson, the founder of Virgin Group, has seen his investment portfolio tumble since 2021 due in large part to his heavy allocation to stocks.
Billionaire and Virgin Group founder Richard Branson’s wealth has tumbled by more than half since 2021 to $3bn as SPAC problems gave him ‘a big jolt from the side through COVID’. (Stupples, B. – 2024, April 9).
Branson’s holdings, primarily in cash-burning U.S. companies, have suffered steep declines in recent years, with their collective values sinking by up to 95%. This downturn has led to a drastic reduction in Branson’s net worth, which has halved since mid-2022 to approximately $3 billion, according to the Bloomberg Billionaires Index.
The decline in Branson’s stock holdings has limited his ability to inject needed cash into his portfolio of Virgin companies that have struggled to be profitable. The pandemic was not kind to Branson, as he was forced to leverage his stock holdings in his Virgin businesses, such as Virgin Galactic Holdings Inc. and Virgin Atlantic. While Branson sold over $1 billion of shares in Virgin Galactic Holdings Inc. to finance Virgin Atlantic’s rescue package, both companies have faced significant setbacks. Virgin Galactic’s stock has plummeted about 98% from its 2021 peak due to operational issues and disappointing financial results.
The one bright spot in Branson’s portfolio? Real estate. Despite his financial setbacks, Branson’s Virgin Group continues to profit from his real estate holdings, including a five-star hotel in Mallorca and Virgin Money, a provider of home loans.
In conclusion, Richard Branson’s investment losses highlight the dangers of relying heavily on equities. The volatility of the stock market and other publicly traded investments like crypto and other block-chain-based investments like NFTs is why the ultra-wealthy allocate most of their portfolios towards cash-flowing tangible assets and businesses like commercial real estate and income-producing businesses that rely on production for their value and not on the fickleness of the investing public.
For those in the know, the wealthy overwhelmingly favor cash-flowing alternatives over equities. In fact, in recent years, they have been seen shedding more and more of the stock holdings they do own.
A recent article revealed that the ultra-wealthy have been shedding their stock holdings at rates never seen before:
Super-rich Americans are now giving up on the stock market, holding historic levels of cash. Here’s why and what they’re plowing their wealth into instead. (Raisinghani, V. – 2023, October 15).
So why are the super-wealthy shedding stocks in droves?
Volatility, inflation, and high interest seem to hold the key.
According to the article above, wealthy investors had just 23% of their net assets in publicly traded stocks. That’s the lowest level of stock exposure in 21 years, according to the report. Unlike Richard Branson, the ultra-wealthy are giving up on the stock market altogether in the face of uncertainty and inflation and are allocating to inflation-hedging assets like CRE and cash-flowing PE.
As an antidote to volatility, the ultra-wealthy are allocating more and more to cash-flow alternatives like CRE and PE to add stability to a portfolio. This is evidenced by Richard Branson’s own portfolio, where his real estate holdings are compensating for his stock losses to keep his empire afloat. CRE is especially appealing, outperforming the S&P 500 over a 25-year period but at lower risk. In addition, the right equity investments in the right private companies and industries offering recession- and inflation-resistant goods and services can also help to hedge against market uncertainty.
The dangers and risks of stock investments, highlighted by the recent erosion of Richard Branson’s wealth, trickle down to the middle class as well. Stocks and 401(k)s are failing Americans, as highlighted by some sobering recent numbers and data.
According to Bank of America, the average 401(k) account balance is $82,300. This is obviously not enough for a comfortable retirement. This is not enough for many Americans to get through just one year. Given this fact, it’s not surprising that 80% of employees consider themselves unprepared for retirement. Even worse, nearly half of baby boomers say they have zero savings for retirement.
For growing and stabilizing wealth, stocks are not the answer. Model the rich, and you’ll find the keys to creating, growing, and maintaining wealth. The key is through passive cash-flowing private businesses and real estate that are no longer restricted to the rich and connected.
Opportunities to invest in alternative assets are becoming more prevalent and accessible than ever before.
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