Billionaire wealth, at least on paper, has plummeted during the recent Wall Street turmoil, illustrating important lessons for all about the ephemerality of stock market gains and losses.
why does it matter: Net worth is something of a public obsession and a kind of pipe dream followed avidly by publications like Bloomberg or Forbes. However, the harsh reality about paper wealth, especially fortunes tied to volatile tech stocks, is that it can be fleeting, and attempts to put an exact number on it can be misleading.
- Elon Musk, Jeff Bezos and Bill Gates are not poor. But their fortunes (most of which are tied to the value of shares in the companies they founded), rise and fall dramatically, and are largely subject to fickle market forces.
- Musk, technically the richest person on the planet, again, on paper, doesn’t have enough liquidity to write a check to buy Twitter outright. That inconvenient truth has weighed on Tesla stock.
And it’s not just the rich: This week, JPMorgan estimated that US savings have seen a total of $5 trillion evaporate in recent months, and that figure could almost double by the end of the year.
what they are saying: The exhilaration of seeing stocks in a portfolio is great, but the inevitable crash to the ground can be much harder to digest.
- “There’s a big difference between decline and loss, and I think that’s the main thing here,” Zach Stein, chief investment officer at the Berkeley, California-based Carbon Collective, tells Axios.
- “For an individual, it’s very important to maintain that distinction, as humans, we focus much more on loss than gain.”
There is a lesson for retail investors, or someone who watches changes in your retirement account. The focus should be on a balanced, long-term portfolio. Strong markets entice investors to bet too much on riskier investments.
- “This tracking of every billion lost and won for the richest among us amplifies the misconception that investing is more about gambling on big wins or losses and draws attention away from the real magic of patient and disciplined financial planning,” Burt White, Managing Partner of the Carson Group, with $20 billion in assets, tells Axios.