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Here's how the world's billionaires make their money

Aarthi Swaminathan
Finance Writer

Most billionaires in the world didn’t inherit their wealth.

How’d they do it? A new study by research firm Wealth-X explains how.

Billionaire wage gap

Most billionaires put their money into public holdings — 36.4% of their portfolios were allocated to this asset class — followed by private holdings at 35%, liquid assets such as cash at 26.4%, and real estate and luxury assets at around 2.2%.

Breaking the group down, those with $1 to $2 billion in assets generally invested mostly in liquid assets, while those with over $50 billion invested mostly in public holdings.

Warren Buffett, Chairman and CEO of Berkshire Hathaway, left, jokes with Gill Gates, right, during a game of bridge following the annual Berkshire Hathaway shareholders meeting in Omaha, Neb., Sunday, May 5, 2019. (Photo credit: AP/Nati Harnik)

Those in the higher tiers have “often founded and currently hold major shares in now-public businesses, which in many cases have evolved into large, multinational companies.” This includes well-known billionaires like Microsoft’s Bill Gates and Amazon’s Jeff Bezos.

(Source: Wealth-X)

Billionaires like banking, finance, and conglomerates

Banking and finance and industrial conglomerates dominated billionaires’ focus last year.

Nearly 21% of billionaires — 538 of them — made an average of $3.2 billion from these two industries.

Real estate, food and beverages, and manufacturing also made the top five.

Tech titans

While tech was conspicuously absent from the list — which was intentional for methodological reasons according to the report — tech billionaires made the most amount of money in 2018.

(Source: Wealth-X)

The tech titans average net worth was almost $6 billion each — ”far greater than in all other industries” — primarily because “this figure is heavily skewed by a select group of extremely wealthy individuals at the very top end.”

That means thanks to people like Bezos, who, in March 2019, “had an estimated net worth of $131 [billion],” they were disproportionately represented on the list.

Nonetheless, “five of the 10 richest billionaires have created the majority of their wealth via the tech sector — evidence of the huge gains that can be made in a sector that can cross borders fairly easily, has comparatively low barriers to entry, and can increase in scale much more rapidly than traditional industries,” the report conceded.

(Source: Wealth-X)

Self-made successes

Debates over how self-made reality star and cosmetics mogul Kylie Jenner really is aside, 2018 was the year of self-made billionaires, the report found.

There was a “gradual increase in the proportion of self-made billionaires, accounting for well over half of the global population [of billionaires],” and that “almost a third of billionaires’ fortunes come from a combination of inheritance and self-made wealth,” said the report.

Virgin's founder Richard Branson. (Photo credit should read MATTHIAS BALK/AFP/Getty Images)

Demographics

Billionaires were also generally much older — their average age was 65.7 — which meant that “for the vast majority, it takes time to accrue wealth,” the report stated.

And while the entire group remains heavily male dominated, “with just over one female for every nine men,” that gender landscape was changing albeit slowly.

“Growth in the female population among the High Net Worth — those with $1 million and more in net worth — and UHNW populations has been outpacing that of males,” the report said.

Aarthi is a writer for Yahoo Finance. Follow her on Twitter @aarthiswami.

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