Many investors are wondering where to invest their hard-earned money.  The markets are currently in a state of disarray and there is no easy way out.  What is an intelligent investor to do in the current environment? Let’s look at the possibilities.

The stock market is not showing any signs of recovery, and with every bit of bad news, from higher oil prices, to additional losses in the Financials sector due to the mortgage crisis, you can expect another 1-2% drop in equities.  So far this year the S&P 500 has already reached double digit losses.  The real estate bubble is yet to fully unfold and additional price drops are expected.  Fixed incomes are under pressure due to the prospect of inflation and higher interest rates.  Cash is earning much less than the rate of inflation.  There seems to be only one place where money is being made these days – commodities.  But many caution that commodity prices are too overheated and that we may be in third bubble of this decade.  First was dot-com stocks, then it was real estate, and now it is commodities.

With all these grim prospects, it is hard to decide what to do.  But great investors understand that money is made in the long-term.  The gyrations of the markets and economic cycles are irrelevant for the conscientious investor.  The most important thing smart investors do is select the best asset allocation for their portfolio that fits their goals and risk tolerance.  Then monitor this allocation occasionally so that it does not get out of balance.

There are many tools available to help you find the right asset allocation for you.  Go to the web site of any major investment firm such as Fidelity, T Rowe Price or Vanguard and you will find guidance on how to split you assets based on your personal situation.  But if these tools are not enough to help you make a decision of what to do with your money, there is one strategy that you can follow that is likely to give you great results – follow the rich.

If there is one thing the rich know how to do well is to make more money.  Study after study shows that no matter what happens to the economy, the rich keep getting richer.  So why not allocate your money in the same way that the rich do?  According to the Merrill Lynch / Cap Gemini Financial Advisors survey published in the recently release 2008 World Wealth Report, the rich had their money allocated in the following manner last year:

• Equities – 33%
• Fixed Income – 27%
• Cash / Deposits – 17%
• Real Estate – 11%
• Alternative Investments – 9%

Alternative investments are defined as structured products, hedge funds, derivatives, foreign currencies, commodities, private equities / venture capital and other miscellaneous investments such as collectables.  Real estate continues to represents a significant portion of the portfolio of the rich, although the allocation in 2007 is 10% lower than in 2006.  Real estate investments include commercial real estate, REITs and other investment properties.   Real estate has always been a good investment option in the long-term, and despite of the current crisis, as the real estate bubble starts to deflate new opportunities for investments in this sector are starting to appear.

If you are looking to achieve financial success, following those that have already achieved it is an excellent strategy.  When it comes to investments, we just gave you the roadmap of how the most financially successful people in the world invest their money.  You can tweak it to fit you own personal preferences and risk tolerance, but if you keep a long-term perspective and follow this general guideline you too can achieve the magic results that the rich manage to achieve – keeping on getting richer no matter what happens to the markets or the economy.