No, they don’t. Liquid assets don’t increase in value. If they had $1 in cash seven years ago, it would be worth less than that today due to inflation.
And guess what those business have? Valuations. Stock price is just an aggregate indicator of the valuation for a company, for the given percentage of shares that are publicly traded. But private companies have valuations, too, and even if they’re not tied to a public stock offering, those valuations are used to form these Billionaire lists.
Same thing with real estate. The value of any asset is based on what someone is willing to pay. Sometimes, you’ll find some crazy billionaire or investment firm who grossly overvalues an asset relative to their peers, and that insane overvaluation does get rolled into those lists.
But such is the nature of economics. You’ve neither gained nor lost value until someone pays you. Until then, it’s anyone’s guess.
When you’re a billionaire, most of your net worth comes from businesses assets you own (and can borrow against without having to claim the loans as income), not liquid assets.
Wealth is not the same as liquid assets
Liquid assets are a type of wealth. For many people, liquid assets make up the biggest part of their wealth.
No, they don’t. Liquid assets don’t increase in value. If they had $1 in cash seven years ago, it would be worth less than that today due to inflation.
Stocks are liquid assets. They can increase in value.
T-bills are also liquid assets. They can also increase in value.
Savings accounts and money market accounts are also liquid assets. They can also increase in value.
When you’re a billionaire, most of your net worth comes from businesses you own, not liquid assets.
And guess what those business have? Valuations. Stock price is just an aggregate indicator of the valuation for a company, for the given percentage of shares that are publicly traded. But private companies have valuations, too, and even if they’re not tied to a public stock offering, those valuations are used to form these Billionaire lists.
Same thing with real estate. The value of any asset is based on what someone is willing to pay. Sometimes, you’ll find some crazy billionaire or investment firm who grossly overvalues an asset relative to their peers, and that insane overvaluation does get rolled into those lists.
But such is the nature of economics. You’ve neither gained nor lost value until someone pays you. Until then, it’s anyone’s guess.
Billionaires are far more likely to own part of a business than 100% of a business. And if you own stocks, then you too own part of a business.
FTFY