A new year makes people think about how they want to spend and save money differently.
CNBC Select spoke with Michael Sonnenfeldt, founder of TIGER 21, a peer-to-peer network for high-net-worth individuals. He says, instead of trying to time the market, his clients are going "back to basics," putting focus on long-term investments in businesses, real estate and diversified portfolios.
You don't need millions to benefit from the investing strategies the ultra-wealthy use. Many, like long-term thinking, diversification and financial discipline — apply to everyday investors.
How the ultra-wealthy invest
Think long term
According to Sonnenfeldt, wealthy investors commit to their investments for the long haul instead of chasing quick profits or reacting to market noise.
"The longer-term players will say, 'If you don't know whether this stock is a better buy at 15 than at 20, you shouldn't be in the stock,'" he explains. This means they only invest when they truly understand the underlying business, including its revenue model, growth potential and profit margins, rather than getting caught up in daily price swings.
This long-term mindset helps rich investors avoid panic selling during market drops and rewards them from the economy's growth over time. For everyday investors, the lesson is to do your homework before buying stocks and focus on holding quality investments for the long term. Trying to time the market or chase short-lived trends usually leads to emotional decision-making that causes you to lose money.
Diversify with index funds
Sonnenfeldt explains that many wealthy investors turn to index funds to access the public markets without the complexity of picking individual stocks.
Index funds are designed to track a benchmark index like the S&P 500. When you invest in an index fund, your money is spread across all the companies in that index, which helps diversify your portfolio more than buying single stocks would.
For example, the S&P 500 includes 500 of the largest U.S. companies. Investing in an S&P 500 fund means your returns reflect the overall performance of these major players.
Because index funds aim to replicate their benchmark's holdings, they tend to carry less risk than owning a handful of individual stocks. Historically, indices like the S&P 500 have generated solid average returns over time, around 10% annually, though it is important to remember that past performance does not guarantee future results.
Sonnenfeldt points out that, on average, most investors do not outperform the market, so a straightforward approach like owning index funds often makes the most sense. For everyday investors, low-cost index funds offer a smart and accessible way to grow wealth steadily without needing deep expertise in stock-picking.
For easy access to index funds, Charles Schwab offers a popular S&P 500 fund with no minimum investment and a very low expense ratio of just 0.02%. Fidelity also provides a zero-expense-ratio fund focused on large-cap stocks, making it an excellent cost-effective option.
Charles Schwab
Minimum deposit and balance
Minimum deposit and balance requirements may vary depending on the investment vehicle selected. No account minimum for active investing through Schwab One® Brokerage Account. Automated investing through Schwab Intelligent Portfolios® requires a $5,000 minimum deposit
Fees
Fees may vary depending on the investment vehicle selected. Schwab One® Brokerage Account has no account fees, $0 commission fees for stock and ETF trades, $0 transaction fees for over 4,000 mutual funds and a $0.65 fee per options contract
Bonus
None
Investment vehicles
Robo-advisor: Schwab Intelligent Portfolios® and Schwab Intelligent Portfolios Premium™ IRA: Charles Schwab Traditional, Roth, Rollover, Inherited and Custodial IRAs; plus, a Personal Choice Retirement Account® (PCRA) Brokerage and trading: Schwab One® Brokerage Account, Brokerage Account + Specialized Platforms and Support for Trading, Schwab Global Account™, Schwab Organization Account and Schwab Trading Powered by Ameritrade™
Investment options
Stocks, bonds, mutual funds, CDs and ETFs
Educational resources
Extensive retirement planning tools
Terms apply.
Pros
- $0 minimum deposit for active investing
- No commission fees for stock and ETF trades and no transaction fees for over 4,000 mutual funds
- Offers extensive retirement planning tools
- Users can get on-demand advice from a professional advisor/Schwab expert
- Robo-advisor Schwab Intelligent Portfolios® available as a no-fee automated service option (with Premium version available for a fee)
- Award-winning thinkorswim® trading platforms and all their cutting-edge tools are now available at Schwab.
- 24/7 customer support access by phone or chat
- Charles Schwab offers over 300 brick-and-mortar branches across the U.S. for in-person support
Cons
- Specific transactions may require commission fee
- Robo-advisor Schwab Intelligent Portfolios Premium charges a one-time planning fee of $300, then a $30 per month advisory fee. For that price, you get unlimited 1:1 guidance from a CFP, interactive planning tools, plus a personalized roadmap for reaching your goals
Fidelity Investments
Minimum deposit and balance
Minimum deposit and balance requirements may vary depending on the investment vehicle selected. No minimum to open a Fidelity Go® account, but minimum $10 balance for robo-advisor to start investing.
Fees
Fees may vary depending on the investment vehicle selected. Zero commission fees for stock, ETF, options trades and some mutual funds; zero transaction fees for over 3,400 mutual funds; $0.65 per options contract. Fidelity Go® has no advisory fees for balances under $25,000 (0.35% per year for balances of $25,000 and over, which includes access to unlimited 30-minute coaching calls with a Fidelity advisor and tax-loss harvesting on taxable accounts).
Bonus
None currently. Check Fidelity's promotions page for the latest offers here.
Investment vehicles
Robo-advisor: Fidelity Go® IRA: Traditional, Roth and Rollover IRAs Brokerage and trading: Fidelity Investments Trading Other: Fidelity Investments 529 College Savings; Fidelity HSA®
Investment options
Stocks, bonds, ETFs, mutual funds, CDs, options and fractional shares
Educational resources
Extensive tools and industry-leading, in-depth research from 20-plus independent providers
Terms apply.
Pros
- No commission fees for stock, ETF, options trades
- No transaction fees for over 3,400 mutual funds
- Fidelity Go® portfolios use Fidelity Flex® mutual funds with zero expense ratios
- Human advisors manage day-to-day Fidelity Go® portfolio decisions
- Unlimited 30-minute coaching calls with a Fidelity advisor for accounts of $25,000 and over (at no extra cost)
- Tax-loss harvesting available on taxable Fidelity Go® accounts with $25,000 or more
- Abundant educational tools and resources with research from 20-plus independent providers
- 24/7 customer service
- Over 100 brick-and-mortar branches across the U.S. for face-to-face support
Cons
- Fidelity Go® has a 0.35% advisory fee per year for balances of $25,000 and over
- Fidelity Go® invests only in Fidelity Flex® mutual funds (no third-party ETFs or individual securities available)
- No socially responsible or ESG portfolio option through Fidelity Go®
- Some of Fidelity's mutual funds require reaching specific thresholds
- Reports of platform outages during heavy trading days
To get started, you'll need to open a brokerage account or use a traditional or Roth IRA. Many employer 401(k) plans also offer index fund options. Once your account is set up and funded, you can pick from a variety of funds — including those tracking the S&P 500, government bonds or international markets.
If you're new to investing, robo-advisors like Betterment and Wealthfront provide a simple way to invest in a diversified mix of index funds and ETFs tailored to your risk level and goals. They handle portfolio management and rebalancing automatically, often at much lower fees than traditional advisors.
Betterment
Minimum deposit and balance
Minimum deposit and balance requirements may vary depending on the investment vehicle selected. For example, Betterment doesn't require clients to maintain a minimum investment account balance, but there is a ACH deposit minimum of $10. Premium Investing requires a $100,000 minimum balance.
Fees
Fees may vary depending on the investment vehicle selected, account balances, etc. Base price is $5/month for investing accounts; automatically switches to 0.25% annually once you reach $24,000 in total balance or set up $200/month in recurring deposits. Premium plan is 0.65% annually.
Investment vehicles
Robo-advisor: Betterment Digital Investing IRA: Betterment Traditional, Roth and SEP IRAs 401(k): Betterment 401(k) for employers
Investment options
Stocks, bonds, ETFs and cash
Educational resources
Betterment's resources hub offers expert-written guides on investing basics, retirement planning and personal finance that are designed to help investors at every level make more informed decisions.
Terms apply. Does not apply to crypto asset portfolios.
Pros
- No trade or transfer fees
- Automated investing with portfolios built around your financial goals, timeline and risk tolerance
- Assign specific goals to each portfolio and invest using different strategies
- Quick and easy account setup with the ability to sync external retirement accounts
- Advanced features include automatic rebalancing, tax-loss harvesting and socially responsible investing
- Premium plan users ($100,000 minimum) get unlimited access to certified financial planners (CFPs)
Cons
- $5/month fee for investing accounts (switches to 0.25% annually once you hit $200/month in recurring deposits or $24,000 in total balance)
- Premium plan requires a $100,000 minimum balance
Wealthfront
Minimum deposit and balance
Minimum deposit and balance requirements may vary depending on the investment vehicle selected. $500 minimum deposit for investment accounts.
Fees
Fees may vary depending on the investment vehicle selected. Zero account, transfer, trading or commission fees (fund ratios may apply). Wealthfront annual management advisory fee is 0.25% of your account balance
Bonus
None
Investment vehicles
Investment options
Stocks, bonds, ETFs and cash. Additional asset classes to your portfolio include real estate, natural resources and dividend stocks
Educational resources
Offers free financial advice for college planning, retirement and homebuying
Terms apply.
Pros
- No trade or transfer fees
- Highly automated investing with portfolios built around your risk tolerance and timeline
- Daily tax-loss harvesting available to all accounts to help reduce your tax bill
- High-yield Cash Account earns 3.30% APY base rate (up to 4.20% promotional APY for new clients with direct deposit) with no account fees or minimum balance
- Offers a cash management account with a debit card and access to 19,000+ fee-free ATMs
- Path financial planning tool gives personalized projections for retirement, home purchases and college savings
- Refer a friend and both parties receive $5,000 managed fee-free
Cons
- $500 minimum deposit for investment accounts
- 0.25% annual management fee
- No access to human financial advisors
- Tax optimization features (stock-level tax-loss harvesting, smart beta) only available at higher account balances
Get real estate exposure
Real estate is a major part of wealthy investors' portfolios because it offers income and diversification. But buying property directly usually requires a lot of money and expertise. However, Sonnenfeldt says everyday investors can still get in on real estate by investing in Real Estate Investment Trusts, or REITs, which are public funds that invest in real estate assets.
You won't get the same return you'd get with owning private real estate outright, but REITs offer a convenient and accessible way to benefit from the real estate market without the hassle of managing property.
"If you don't have the resources or knowledge to invest in long-term private real estate, you still get the market return, which historically has been 8% to 10%, just by doing the ETFs," Sonnenfeldt says. "So, no matter how you get it, when you think about risk, return and effort, buying the ETFs has been the winning play."
This makes real estate investing possible for almost anyone, even those with a smaller budget. You can invest in publicly traded REITs through any brokerage account at places like Vanguard, Robinhood* or E*TRADE.
Vanguard
Minimum deposit and balance
Minimum deposit and balance requirements may vary depending on the investment vehicle selected. No minimum to open a Vanguard account, but minimum $1,000 deposit to invest in many retirement funds; robo-advisor Vanguard Digital Advisor® requires minimum $100 to enroll.
Fees
Fees may vary depending on the investment vehicle selected. Zero commission fees for stock and ETF trades; zero transaction fees for over 3,000 mutual funds; $20 annual service fee for IRAs and brokerage accounts (waived with at least $50,000 in qualifying Vanguard assets or by opting into paperless statements); robo-advisor Vanguard Digital Advisor® charges approximately 0.15% net advisory fee annually (after fund revenue credits; 90-day fee waiver for new clients).
Bonus
None
Investment vehicles
Robo-advisor: Vanguard Digital Advisor® IRA: Vanguard Traditional, Roth, Rollover, Spousal and SEP IRAs Brokerage and trading: Vanguard Trading Other: Vanguard 529 Plan
Investment options
Stocks, bonds, mutual funds, CDs, ETFs and options
Educational resources
Retirement planning tools
Terms apply.
Pros
- No commission fees for stock and ETF trades
- No transaction fees for over 3,000 mutual funds
- One of the largest ETF and mutual fund offerings available, with an average expense ratio of 0.07%
- Robo-advisor Vanguard Digital Advisor® available with 90-day fee-free trial and approximately 0.15% net annual advisory fee after that
- Three portfolio strategies available through Digital Advisor: all-index, active/index, and ESG
- Vanguard Personal Advisor® offers access to a team of financial advisors starting at $50,000; dedicated CFP access available at $500,000 through Personal Advisor Select®
- Vanguard 529 Plan helps you save for college early on
- Excellent customer service with phone and email access Monday through Friday
Cons
- $20 annual service fee for IRAs and brokerage accounts (waived at $50,000 in qualifying assets or with paperless statements)
- Vanguard Digital Advisor® requires $100 minimum to enroll and charges approximately 0.15% net advisory fee after 90-day trial
- Digital Advisor portfolios invest only in Vanguard funds (no access to third-party ETFs)
- Basic trading platform compared to competitors; limited research and data tools
- No cash management account
Robinhood
Minimum deposit and balance
Minimum deposit and balance requirements may vary depending on the investment vehicle selected. No minimum required to open an account or to start investing
Fees
Fees may vary depending on the investment vehicle selected. Commission-free trading; regulatory transaction fees and trading activity fees may apply
Bonus
Get a free stock added to your brokerage account when you link your bank account and fulfill the promotion conditions (keep it or sell after 2 trading days)
Investment vehicles
Brokerage account: Robinhood Financial commission-free investing
Investment options
Stocks, ETFs, options, fractional shares, IPOs, and select cryptocurrencies Robinhood Crypto (availability varies by location)
Educational resources
"Investing basics" blog, an online library of content and Robinhood Snacks newsletter
Terms apply. *(Review Robinhood disclosures here.)
Pros
- $0 minimum deposit to open an account and start investing immediately
- Commission-free trading on stocks, ETFs, options and crypto
- Get a free stock just for linking your bank account
- Access to fractional shares (own a piece of stock for just $1)
- Beginner-friendly app with built-in educational content
Cons
- No human advisor or managed portfolio option
- Fees outside of commissions may apply
E*TRADE
Minimum deposit and balance
Minimum deposit and balance requirements may vary depending on the investment vehicle selected. No minimum to open an E*TRADE brokerage account; minimum $500 deposit to invest in robo-advisor platform Core Portfolios.
Fees
Fees may vary depending on the investment vehicle selected. Zero commission fees for stock, ETF and options trades; zero transaction fees for over 4,400 mutual funds; robo-advisor Core Portfolios charges 0.30% annual advisory fee
Investment vehicles
Robo-advisor: E*TRADE Core Portfolios IRA: E*TRADE Traditional, Roth, Rollover, Beneficiary, SEP and SIMPLE IRAs, IRA for Minors and E*TRADE Complete™ IRA Brokerage and trading: E*TRADE Trading Other: E*TRADE Coverdell ESA (Education Savings Account), Custodial Account for minors and small business retirement plans
Investment options
Stocks, bonds, mutual funds, CDs, ETFs, options and futures
Educational resources
Educational library includes in-depth articles and videos for any type of investor; access to Morgan Stanley research and institutional-grade market insights following E*TRADE's acquisition.
Terms apply.
Pros
- No commission fees for stock, ETF and options trades
- No transaction fees for over 4,400 mutual funds
- Core Portfolios offers automated investing with a choice of standard, socially responsible (ESG), smart beta and tax-sensitive portfolio strategies
- Tax-loss harvesting available through Core Portfolios at no additional cost
- Backed by Morgan Stanley’s institutional research and wealth management resources
- E*TRADE Coverdell ESA helps you save for college early on
- Active traders receive volume discounts on options
- Free analyst research and investing tools
- Strong mobile platform with Power E*TRADE for advanced trading
Cons
- Core Portfolios requires $500 minimum to enroll and charges 0.30% annual advisory fee
- No access to certified financial planners through Core Portfolios
- No forex trading
- Website can be cumbersome to navigate
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Meet our experts
At CNBC Select, we work with experts who have specialized knowledge and authority based on relevant training and/or experience. For this story, we interviewed Michael Sonnenfeldt, founder of TIGER 21, a peer-to-peer learning network for investors and entrepreneurs with $10 million to $1 billion of personal net worth.
Why trust CNBC Select?
At CNBC Select, our mission is to provide our readers with high-quality service journalism and comprehensive consumer advice so they can make informed decisions with their money. Every investing article is based on rigorous reporting by our team of expert writers and editors with extensive knowledge of investment products. While CNBC Select earns a commission from affiliate partners on many offers and links, we create all our content without input from our commercial team or any outside third parties, and we pride ourselves on our journalistic standards and ethics.
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*(Review Robinhood disclosures here.)
