5 Ways the Wealthy Put Their Money To Work That the Middle Class Can't

Yahoo

25-07-2025

Wealthy people often operate in a completely different financial world than the middle class. They have access to exclusive investment vehicles, unique tax-friendly strategies and investment structures, to name a few differences. And many affluent families can take advantage of financial tools that help them grow, protect and transfer wealth in ways most Americans simply can't.
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'Middle-income individuals can build wealth in the areas where they have access (for example, low-cost, exchange-traded funds) just like the wealthy but may not have enough to put money into more alternative investments like private equity or hedge funds,' said Richard McWhorter, managing partner and private wealth advisor with SRM Private Wealth.
Experts explained what the wealthy can do that the middle class can only aspire to.
Access to Exclusive Investment Vehicles
Wealthy investors often have access to private equity, hedge funds and other 'alternative investments,' which typically require high minimums or accreditation, McWhorter said. These opportunities are usually out of reach for middle-class investors.
Most of the investments within the alternative investment bucket (hedge funds, private equity, venture capital) are not available due to certain criteria to be accepted and/or minimum investments imposed by the investment sponsors, McWhorter said.
Even if these investments are volatile or don't have a quick return, wealthy investors have the financial padding to take on that risk without threatening their basic needs.
'They might have less leverage that can be impacted during this time as well,' he added.
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The Long-Term Advantage
Because wealthy individuals don't rely on their invested assets for day-to-day expenses, they're able to invest for the long term and potentially get higher returns over time.
'This means that affluent individuals can begin investing sooner, which translates into significantly higher returns over time, thanks to compounding dividends and returns,' said Leslie Kehoe, managing director and senior wealth strategist at CIBC Private Wealth, US.
Advanced Financial Structures
Wealthy individuals also benefit from unique financial structures like trusts, donor-advised funds and private foundations, McWhorter explained. These structures offer tax advantages and greater control over how their wealth is invested and transferred.
'Wealthier people have more funds to lock away in a trust structure or to donate monies to a donor-advised fund than those with less wealth as it could impact their standard of living,' McWhorter said.
'Trusts are central to many strategies,' Kehoe said.
She explained that different types of trusts — such as Grantor Retained Annuity Trusts (GRATs), Spousal Lifetime Access Trusts (SLATs) and Dynasty Trusts — can help reduce estate taxes, protect assets from creditors and facilitate tax-efficient wealth transfers across generations, keeping money in wealthy families.
Charitable Strategies and Tax Efficiency
Charitable giving is another area where wealthy individuals have a great ability to take advantage of the financial benefits of their philanthropy. Vehicles like donor-advised funds, private foundations and charitable remainder trusts can help reduce taxable income, defer capital gains and establish long-term giving plans.
'These strategies aim to … ensure a smooth and tax-efficient transfer of wealth across generations — all within the framework of U.S. tax compliance,' Kehoe explained.
Family Offices and Comprehensive Planning
Some wealthy families also protect their wealth by using private family offices — essentially in-house financial firms — to manage their wealth. These offices handle everything from estate planning to portfolio management and then some.
'These offices help structure portfolios to take advantage of tax-efficient investments and use entities like LLCs or partnerships to consolidate control and manage income and estate tax exposure,' Kehoe said.
While most middle-class investors won't have access to such services, it's still possible to hire financial advisors and planners for strategic support.
'Aside from valuable advice that often limits liabilities and risk exposure, having a strong relationship with a wealth advisor can help individuals craft a highly customized financial strategy to meet the specific goals of their clients,' she added.
What Middle-Class Investors Can Do
While the average middle-class investor may not have access to these elite financial tools, they still have meaningful ways to grow wealth. Experts emphasized consistency, planning and leveraging accessible vehicles like retirement accounts and low-cost index funds.
'They should still continue to build their wealth with the tools available to them, which,' McWhorter said, 'are ample.'
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This article originally appeared on GOBankingRates.com: 5 Ways the Wealthy Put Their Money To Work That the Middle Class Can't