What Are the Best Asset Classes to Get Rich? – The Get Rich Portfolio by Meb Faber

What Are the Best Asset Classes to Get Rich? To become rich, you will need to choose a portfolio that will generate the highest possible return with the lowest potential risk.

Imagine that you are a poor person who wants to become rich. The stock market offers you many asset classes and investment portfolios, but not every asset class and portfolio will suit this purpose.

In this article, we will look at possible ways that can help you become rich. We will create and backtest our Get Rich Portfolio Strategy designed for this purpose. We stole the title of the article from Meb Faber.

Related reading:–Other portfolio investment strategies and systems

What Is The Best Get Rich Portfolio?

What Are the Best Asset Classes to Get Rich? In our opinion, the ideal portfolio for getting rich should meet the following requirements:

  • The portfolio shouldn’t use leverage. Ideally, you should only use your own money, not borrowed money. Of course, you can get rich faster if you use leverage and have positive returns, but you can also lose money faster. It’s all a trade-off;
  • The portfolio should have a sufficient level of return so that you have time to become wealthy at a relatively mature age;
  • If the portfolio returns are low, then you risk not living to see that happy day when you become rich, or get rich when you are old or sick. Why do you need this wealth if your health is gone?
  • If the portfolio return is high, then you risk losing part of your funds or all of your funds without reaching your goal (assuming higher risk);
  • The portfolio should be reasonably diversified and, most importantly, should not be overly diversified. Over-diversification can worsen your portfolio’s reward/risk ratio;
  • The allocation of assets in a portfolio should be such to minimize drawdown as much as possible without compromising its long-term returns.

What Are the Best Asset Classes For The Get Rich Portfolio

The financial market has many asset classes to offer to build your own Get Rich portfolio, but not all asset classes will suit our goal.

Professor Jeremy Siegel, in his book “Stocks For The Long Run,” conducted a study and found out that over the past 220 years (from 1801 to 2021), stocks have been the most productive asset class. Other asset classes, such as Bonds, Bills, and Gold lag far behind stocks:

Get rich portfolio

If you invested $1 in stocks in 1801, that $1 would be worth $2,334,920 in 2021. If you invested $1 in bonds it would only add up to $2,163. The difference is simply enormous! The bills and gold are even worse than bonds in terms of performance.

Therefore, the answer suggests that to become rich, you must invest mostly in stocks!

However, most humans don’t become over 200 years old, and most people want to get rich quickly. What is quickly? That is relative, but you need a a couple of decades of investing (and a lot of saving).

A stock is a security issued by a joint-stock company, in other words, an issuing company. All investors who bought the stocks became co-owners of the company – they are shareholders. It might be a small ownership in a public company, but it’s a part that can be valuable.

It’s simple: to get rich, you need to become a co-owner of a successful profitable business. And to become a co-owner, you need to buy stocks.

If you open Forbes magazine and look at the ranking of the richest people in the world, you will notice one fact: almost all of them are business owners, i.e. owners of a huge business. In this ranking, you will hardly find bond or gold holders who have been able to build a massive fortune with gold and bonds.

Now, let’s form a list of interesting ETFs that reflect different stock categories and rank them by the Return/MaxDD ratio since inception. We picked only the most liquid and broadly diversified ETFs with a long performance history:

Stock CategoryETF NameETF TickerCAR (%)MAXDD (%)