When you think of how celebrities make money, you probably think of film, TV, and music contracts. You may also think of endorsements and product placement in movies and TV shows. But what you probably don’t think of is investing. Some of the most famous faces in the world are making a fortune from investing.
Here’s how celebrities like Will Smith, Akon, Kevin O’Leary, and Oprah Winfrey have earned millions by investing.
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What Are Some Ways Celebrities Invest to Make Money?
Real Estate Market
Real estate investment is one of the most common ways that celebrities make money and for good reason. Besides the fact that it’s incredibly lucrative, real estate is also relatively simple to do. And if you’re famous, you won’t have any issues with getting a loan or financing. This also allows celebrities with a lot of baggage to make money without the public knowing about it. For example, see the real estate properties of Harrison Ford.
A lot of times, we don’t know how much money celebrities are making because they go behind the scenes and invest in other things. Are there any specific types of real estate investments that celebrities like to invest in? Real estate investment trusts (REITs) are a big one. These are essentially stock issued by private corporations which own real estate and rent it out.
Backing Start-ups
Some celebrities have investments in start-ups, ranging from YouTube to new startups by entrepreneurs who idolize them. Although these celebrities make investments in several companies, they tend to focus on high-profile investments. For instance, Ashton Kutcher, an actor/investor invested $1 million in Skype when it was still owned by eBay.
However, we can’t just look at celebrities as people who sit back in their fancy Hollywood mansions and wait for opportunities. They actively seek out investment opportunities as they want to be a part of something exciting and help entrepreneurs succeed.
Tax-Free Bonds
People don’t always realize that celebrities don’t just make their money through the box office. Oftentimes, they will use their star power to help them generate money from different places. It’s one of the reasons why you may see big celebrities on television running around, trying to get investors to buy into municipal bonds, which are special types of bonds that don’t have taxes associated with them. Instead, when you buy these particular bonds, you can earn more money on top of what you would make off of a normal bond investment.
Online Trading
Many celebrities are known for their extravagant lifestyles. But the truth is that these rich people have learned to save and invest their money in businesses they care about. Some celebrities are now starting to learn more about alternative investing, specifically in the realm of online trading.
This is because online trading is widely accepted and has a lot of advantages that people enjoy. One of the best things about online trading is, you don’t need to have money like a celebrity to venture into it. Your modest income can get you started and you can find a trading guide or other resources on the internet to put you through as a beginner. It is essential to go through the theoretical part before engaging in further action.
Retail (e-Commerce)
With the outbreak of e-commerce, there has been an increase in the necessity to make investments. This is because many businesses are required to invest in technologies and transform their functionality to match up with the new demands of consumers. Among numerous investment forms, celebrities choose retail as a way to make money.
Private Equity
Many celebrities invest in private equity funds. These are equity ownership positions in a company’s capital structure. They can either focus on one specific industry or have a broad mandate to invest across many different industries. Private equity firms raise money from many sources, including public markets and private investors that include celebrities such as LeBron James.
Once the private equity firm buys a position, they make capital contributions on behalf of their limited partners. This allows them to increase their ownership position through the allocation of additional capital. The private equity firms then take management control of the business and are responsible for changing the strategy to improve performance.
Art
Art…it’s more than just a pretty picture. A beautifully designed painting or sculpture will appreciate in value over time, which makes it an investment and an attractive one for high-income earners who might be looking for tax-friendly ways to earn money. Celebrities often have the means to buy art as an investment.
Oftentimes they start out purchasing posters of their favorite bands or paintings, but soon come to realize that it is also a great way to make money. Art is an investment many people don’t take chances with, but most big artists do.
Liquid Savings
Celebrities have an interesting way of making money. Some, like Donald Trump, are known for owning or developing businesses. There are some celebrities, however, who prefer to invest their money in assets that are more liquid and safe such as US treasury bills and bonds. These have the added advantage of liquidity in case the celebrity feels the need to liquidate quickly.
Annuities
A celebrity annuity is an investment that guarantees payments for a stated period, with payments determined by a fixed rate of interest or a set number of payments. In this sense, an annuity is somewhat like a salary from work. Both the investment and the salary provide regular payments over time. In either case, the investor’s income can be calculated pretty accurately before investing or accepting the job offer.
Well, there you have it. A peek into how celebrities invest all that money they acquire. We hope you’ve found it useful and have picked up a few tips on different ways that celebrities make money.
And remember – if you’re going to make money with investments in an attempt to become famous like some of these celebrities, it’s important that you open a low-cost ISA and spread your money across different asset types rather than placing all of your eggs in one basket.
