It had been a great time to be a millionaire up until January.

Globally, there are an increasing number of millionaires. But given that they are overloaded with assets whose values are falling, this year’s fierce bear market may put an end to that. 

According to the recently released World Wealth Report by Capgemini Research Institute, millionaires invested more than three-quarters of their capital in stocks, bonds, real estate, and alternative assets. Over the past year, the average decline for all four of these asset classes has been greater than 15%. Cash and equivalents, the sole asset that isn’t in disrepair, make up only 24 percent of multimillionaires’ portfolios. Compared to three years earlier, that is a decrease of 27%.

High net worth individuals (HNWI) essentially walked right into the stock and bond market collapse of 2022. Before the S&P 500’s bear market in 2022, little changes were done. According to Wilshire Associates, investors have now lost close to $12 trillion this year alone in market losses. Except for cash, none of the other asset groups are particularly helpful. 

“The choice of asset class by HNWIs worldwide in 2021 was mostly unaffected by Covid-19. As growth allocation (equities and alternative investments) stayed at roughly 43 percent from January 2020, investors adopted a wait-and-see attitude and a positive outlook “according to the Capgemini research, up to 44%.

Up until January, it had been a fantastic time to be a millionaire. 

According to the most recent data from Capgemini, the number of high net worth individuals worldwide increased 7.8 percent in 2021. Additionally, thanks primarily to booming global stock markets, their combined wealth increased by 8%. High net worth persons fall into three categories: “millionaires next door” ($1 to $5 million), “mid-level millionaires” ($5 to $30 million), and “ultrahigh net worth” ($30 million or more). 

In 2021, the region with the most new wealth was North America. As wealth increased by almost 14 percent, the number of high net worth individuals in North America increased by 13.2 percent. And the reason is obvious. More than double its usual annual return, the Vanguard Total Stock Market ETF (VTI) increased by 24 percent in 2021.

Investors’ portfolios were filled with that enormous profit. Even the benchmark for fixed income portfolios, the Vanguard Total Bond Market ETF (BND), only fell by 3.9 percent. 

However, the power that created prosperity is now the one who destroys it. And quickly. 

It’s tempting to attribute millionaires’ financial hardship this year on the S&P 500’s decline and the declining stock market. But that only tells a portion of the tale. 

Yes, over the previous 12 months, the Vanguard Total Stock Market ETF has decreased by 15.6%. Wealthy people invest 29% of their money in equities. On a percentage decline basis, however, that is not the area of most millionaires’ portfolios that has been hurt the most. In that period, the 15% of their portfolios that are made up of real estate have decreased even more, by 17.2%.

The fact that the portion of millionaires’ portfolios intended to protect them from bear markets isn’t working is maybe more remarkable. Bonds make up 18% of the portfolios of millionaires. However, the overall bond market has declined by more than 14% in the past year. Many wealthy people don’t anticipate that uncommon bond market catastrophe. 

For now, the only relatively safe place for millionaires is in their financial reserves. Only 1.3 percent has been lost by the JPMorgan Ultra-Short Income ETF (JPST) over the previous 12 months. It is therefore a unique safe refuge. 

“It remains to be seen, though, if market reversals and geopolitical crises would eventually lead HNWIs to rearrange their portfolios. So let’s once more keep an eye on the markets “the Capgemini research stated.

But now, one thing is certain. There are definitely some millionaires who wish they had invested more than 24% of their wealth in cash. It’s already too late for that.