Recap: Wealth is the sum of all assets, minus liabilities and debt. Assets are specific items of value one owns.
Liquid assets are cash or “cash-equivalents” - items easily converted into cash without significant loss of value - such as bank accounts, money market funds and stocks - except for stocks (and bonds) that are prohibited by law or contract from immediate public resale. These “restricted securities” are typically held by company insiders, such as billionaires, with their wealth concentrated in one or a few companies.
Illiquid assets are investments or properties that cannot be quickly converted into cash without a significant loss in value or a lengthy, complex selling process. Examples of illiquid assets include real estate, private equity, venture capital, collectible art, and restricted securities. Even when legal or contractually allowed, selling Illiquid assets quickly is hard because these assets rarely have a ready pool of buyers and would likely require slashing prices, leading to substantial financial loss.
So where would billionaires get the cash to pay a wealth tax? Mostly from their liquid assets, which comprise around 31% or their asset holdings, on average (Altrata, 2024, Cato Institute, 2025). See Post I of this series for more details.
Method: I’m ultimately interested in how a billionaire wealth tax would impact the US economy and American people. To answer that question, even tentatively, requires answering a lot of other questions. My method will be to ask AI a question, review AI sources to confirm accuracy of response, and then tweak the AI summary for brevity, neutrality and relevance, occasionally incorporating AI information from related inquiries. I’ll generally use AI material from 3-4 sources. Occasionally, one source will stand out for depth and quality, and I’ll rely on the material from that source alone.
I’m using AI in this series, because AI does a decent job of capturing the gist of its source material. However, I don’t assume the source material reflects the whole range of expert opinion on these issues.
Take-Away from last post: There will likely be a market for however many shares billionaires have to sell to pay a wealth tax, assuming the tax is not so high that the market is flooded with sell orders and the tax itself doesn’t scare off investors. The question for me is whether the companies whose shares they sell would change as a result of the new mix of investors and if the changes would benefit the companies and the US economy.
Question 4: How do the equity investment strategies of the super-rich differ from other types of investors?
The super-rich differ from other investors by prioritizing alternative investments (private equity, venture capital, hedge funds), direct ownership of real estate, and high-risk, high-reward ventures over traditional public stocks and bonds . They hold roughly 20%+ in alternatives to increase diversification and reduce market correlation, prioritizing long-term growth and capital preservation.
Key Differences in Equity Investment Strategies:
Alternatives & Private Equity: High-net-worth investors allocate significantly more to alternatives, such as private equity and venture capital, compared to the near-zero allocations of average investors. They often invest in private companies, startups, or pre-IPO opportunities to secure superior returns.
Asset Allocation & Diversification: While the average investor heavily favors public stocks and bonds, the ultra-wealthy use a broader portfolio that includes direct real estate (e.g., income-producing property), private equity, hedge funds, and alternative assets such as gold, oil, and art.
Lower Liquidity Appetite: The super-rich are willing to lock up capital for several years in illiquid investments like private equity and direct real estate, whereas traditional investors often prioritize liquidity to access funds in case of emergencies.
Focus on Tax Efficiency: Wealthy investors utilize advanced strategies like direct indexing and tax-loss harvesting to manage tax liabilities, which is rarely done by typical retail investors.
High Risk/Direct Control: The ultra-wealthy are more likely to take large, direct stakes in companies to influence management and operations. They often exhibit a higher risk appetite, investing directly in startups.
Generational Shift towards Alts: Younger wealthy investors (under 40) are accelerating this trend, allocating roughly three times more to alternatives and far less to public stocks than previous generations.
Sources: Investopedia, 2025, Raymond James, 2024, Motley Fool, 2025, Wiser Advisor, 2024, Alpen Partners International, 2025, Nasdaq, 2024, Yahoo Finance, 2023
Take-way: Compared to other investors, the super-rich are more risk-tolerant, hands-on, and willing to make long-term commitments. They often favor private equity over public stocks and allocate more capital to illiquid investments.
Next Question: How do investment strategies impact company and economic growth?