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How Investors Can Capitalize on the Rich

Companies / Investing 2010 Jul 15, 2010 - 09:26 AM GMT

By: Ron_Rowland


Best Financial Markets Analysis ArticleDo you want to be rich — or are you already there? The answer, of course, depends on how you define “rich.”

Today we’ll look at this surprisingly difficult question — and then consider a few exchange traded funds (ETFs) that cater to the very small group of very wealthy people.

Who Is Rich?

First, let’s get a couple of obvious points out of the way. Certainly you can be “rich” even if you don’t have much money: Rich in family, friends, generosity, spirit, even love. This is wonderful, and I’m happy for anyone who enjoys such wealth.

Next, we have to remember that even monetary wealth is relative. You can be a multi-millionaire and still feel like a piker if you are, say, sitting in on a board meeting at Goldman Sachs. On the other hand, just about any American is wealthy compared to a typical rural villager in Africa.

These considerations aside, the question remains: Are you rich? Here’s my quick, totally non-scientific answer: If you make more money than 99.9 percent of the people around you, you’re rich. Congratulations!

This means that in our nation of about 300 million people, roughly 300,000 of us are “rich.” Worldwide, probably only a few million folks qualify. I don’t know how many of my readers fall into this category. Statistically, the answer is probably “Not many.”

Don’t lose hope, though. The rich need help spending their money — and I have a few ways you can pitch in.

Team up with the Rich: Luxury ETFs

Here’s something you can count on: Whatever else happens in the economy, most of those 300,000 rich people will stay rich. They’ll continue doing what they’ve always done — living the good life.

Even if you never break into the inner circle, you can still do quite well for yourself by catering to the wealthy elite. Help them do the things they want to do and buy the things they want to own, and you’ll reap a nice reward.

So how do you do this?

As I usually say, ETFs are the best answer. So let me tell you about three ETF ideas that are specifically designed to cater to the rich.

Idea #1: Claymore/Robb Report Global Luxury ETF (ROB)

You’ve probably seen the Robb Report, a glossy magazine filled with ads for sports cars, fancy watches, and jewelry. A few years ago the publishers teamed up with Claymore to launch an ETF for the same audience.

ROB holds the stocks of retailers, manufacturers, travel and leisure providers, investment and other firms that provide “luxury” goods and services. Here are a few of the fund’s top holdings. I’ll bet you recognize some of the names …

The rich love their cars.
The rich love their cars.
  • Bayerische Moteren Werke (BMW)
  • Hermes International
  • Luxottica Group
  • Nordstrom
  • Tiffany & Company
  • Sotheby’s
  • Orient-Express Hotels

Get the idea?

For multi-millionaires, these companies are as familiar as McDonald’s and Wal-Mart are to the rest of us. This doesn’t guarantee they’ll be good stocks, of course. But ROB is an easy way to put a slice of your portfolio to work in this sector.

Idea #2: PowerShares Dynamic Leisure & Entertainment (PEJ)

PEJ is similar to ROB but a step downscale. The stocks in this ETF serve the next tier down from that top 0.1 percent to maybe the top 1 percent to 5 percent.

People in this category aren’t as wealthy. But there are more of them and their spending adds up to big bucks. Sometimes they are called “the mass affluent.”

A few of the top holdings in PEJ are …

  • Walt Disney
  • Starbucks
  • Cheesecake Factory
  • Panera Bread
  • Cinemark
  • Ruby Tuesday

As you might suspect, PEJ is heavy on restaurant and media stocks. The mass affluent spend a lot of money with these companies, and some of them have done very well over the years. PEJ is a great way to get your piece of the action.

Idea #3: Market Vectors Gaming ETF (BJK)

High rollers are very profitable ... for the house.
High rollers are very profitable … for the house.

If you’ve ever been in a Las Vegas casino, you probably noticed those curtained-off spaces where the high-rollers go to play. Usually there is a big, intimidating bouncer standing at the entrance to keep out the riff-raff.

There’s a good reason the casinos provide such area: They get a huge chunk of their profits from these few tables. Even among the ultra-rich, heavy gamblers are a small minority.

Casinos compete to land these “whales,” a global group — maybe only a few hundred people — that can blow thousands of dollars in seconds and still call it “entertainment.”

BJK is the one ETF that zeroes in specifically on the gaming sector. It holds stocks like …

  • Las Vegas Sands
  • Wynn Resorts
  • Sands China
  • MGM Mirage
  • Ladbrokes PLC

As you probably gather from the names, gaming is a global business. Right now Asia is a top growth area as Chinese prosperity creates new wealth. And several gaming companies are aggressively going after a share of it.

With BJK, you get a diversified portfolio with near-direct exposure to the fortunes of the super-rich. As they prosper, so do the casino stocks. That’s why I think BJK is a great long-term bet.

Today I’ve given you three ETF ideas to help you tap into the wallets of the wealthy few. Are they a guarantee you’ll become rich, too? Unfortunately, no, but these ETFs still have huge potential. Check them out and be sure to use a limit-order whenever you buy or sell your shares.

Best wishes,


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