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We’re super excited to present a guest post from Joseph Hogue. Joseph is a Certified Financial Advisor, and he’s going to give you an insider’s look at how a market professional invests his own money. So pay close attention to this one!

A little more about Joseph before we jump in: He worked as an equity analyst and an economist before realizing being rich is no substitute for being happy. He now runs four websites and a YouTube channel on beating debt, making more money and making your money work for you. A veteran of the Marine Corps, he now makes more money than he ever did at a 9-to-5 job and loves building his work from home business.

How a Market Professional Invests His Money [and it’s not in stocks]

Technology has made it extremely simple to invest your money, almost too simple. Michelle highlighted some of the best investing apps available but all the choices in investments can be overwhelming.

It’s tempting to just turn on the TV or click online for the mass market advice on which stocks to buy and how to get rich. That’s how most people invest.

Listening to the endless drone of stock market analysts and pundits touting this stock or that, that most market professionals hold almost no stocks.

I saw this first hand as an investment analyst and wealth manager and learned a better way to invest.

But only after making some of the most common investing mistakes myself.

My First Investing Mistake

I started investing in my early 20s while in the Marine Corps, and like most people, I invested exclusively in individual stocks. I watched CNBC and read all the market analysis I could to chase high returns and the dream of getting rich in stocks.

This was the late 90s so it didn’t seem like a bad strategy. I was making money. Then again, everyone was making money.

Of course, until the market crash wiped me out.

I was invested almost completely in tech stocks with very few stocks of companies in other sectors. I held no bonds, real estate or any other asset.

Why would I? All you ever heard on TV was about stock investing and which companies to buy. Every once in a while, you’d hear someone talk about the importance of investing in other assets but it was rare.

How Stock Market Analysts Invest Their Money

After getting out of the Marines, I worked as a real estate analyst and started freelancing as an investment analyst for advisors. It was here that I learned how real investing differs from what you see on TV.

You see, all analysts are required to disclose their investments and most are prohibited from owning stocks they analyze. This is to prevent conflicts of interest with their research. Some analysts are even prohibited from owning individual stocks.

That means most of the people you see on TV hold very little in stocks and if they do, it’s in broad-based exchange traded funds (ETFs) that cover the entire market. Of course, the analysts know this isn’t just a way to avoid that conflict of interest, it’s also a smarter way to invest.

Investing in those broad index funds that hold hundreds of stocks each means analysts don’t have to worry about any individual stock falling and crushing their nest egg. Each stock in the fund might account for all of 2% or less of the total.

My favorite investing strategy is based on this idea of limited risk in ETFs. It’s called the core-satellite strategy and is very easy to follow.

You invest the majority of your money, maybe 60% or 70%, in a few broad ETFs to get that overall market exposure. If you want to invest in individual stocks, you put the remaining 30% in less than 10 companies. You’ll earn market returns from most of your portfolio but with the opportunity for a little higher return from those individual stocks.

Understand that when I talk about investing 70% in funds and 30% in individual stocks, that doesn’t mean all your money should be in stocks. That’s just the breakdown of your money you have in stocks which might only be two-thirds of your total nest egg. The remaining portion should be invested in alternative assets that will spread your risk away from stocks.

What the Rich Taught Me about Investing

After freelancing as an equity analyst, I also spent some time working in private wealth management. This gave me the chance to see exactly how the rich invest their money and it’s completely different from what you might expect.

In fact, Scorpio Partners and BNP Private Wealth surveyed over 2,500 clients with an average net worth over $7.5 million and found the rich, on average, invest less than one-fifth of their money in stocks. Wealthy families in the survey actually hold more in cash (19% of total wealth) and bonds (21%) than they have in stocks.

This is because the rich have more than a third of their wealth invested in their own business (25%) and in startup companies (9%). The wealthy aren’t waiting for stocks to make them rich, they’re developing the businesses that will create wealth.

You might not think of starting a side business as an investment and it’s certainly not as easy as flipping to your favorite investing show for a few stock tips, but it’s one of the best ways to make your money work for you.

How to Use this in Your Own Investing Plan

These two ideas, the simple core-satellite strategy and that idea of investing in a side business rather than stocks, might not be the easy advice you see on TV but it’s how Wall Street analysts and the rich really invest.

Not even the professionals really know where stocks are going from one year to the next. Worry less about making money in the market and take the risk out of your nest egg with the stress-free market returns in the core-satellite approach.

Building your own business, even if you’re only able to spend five hours a week, will make you wealthy like no stock-picker ever could. Stop waiting for Wall Street to make you rich and put yourself on that path right now.