On Wall Street, the “herd instinct” is a phenomenon that describes traders and investors following each other and gravitating to the same instruments in the hopes that they will all get rich together. The herd instinct has been strong in recent years, particularly as it relates to FAANG stocks, a group comprised of Facebook, Amazon, Apple, Netflix, and Google. What many billionaires do instead of following the herd is to sit back and watch as it all falls down; they may have anticipated this cycle by placing sell orders on FAANG stocks, or they may just buy them when they are very cheap.
Retaining the services of an expert tax adviser is a very smart investment, particularly when it comes to estate planning, keeping assets in the family, and reducing liability. The truth about taxation in the United States is that is can still be quite high for wealthy individuals and even small business owners whose companies are starting to turn nice profits, but this situation can be ameliorated through the various advantages offered by the Tax Cuts and Jobs Act of 2017.
After the Wall Street crash of 2008 and the Great Recession, Americans have been moving away from savings and investment plans such as 401(k) and individual retirement accounts, financial plans that can considerably lower tax liability. There are also legal instruments such as irrevocable trusts that can not only reduce tax liability when someone passes away and bequeaths wealth to surviving relatives; they can also keep zealous creditors at bay and protect the estate against phantom plaintiffs filing frivolous lawsuits.
Many traders and investors think of markets as machines; while it is true that Wall Street is a perfect information game in the sense that all participants have access to all pertinent information to guide their actions, billionaires know that it is impossible to predict what other investors will do at any given time. When it comes to investing in blue-chip stocks, billionaires know that the market has an upward tendency that can translate into profitable situations, but only if they hold on to their positions for a long time. To this effect, American investors are infamous for jumping in and out of positions; even though this strategy can also be profitable, it lacks tax advantages and can become very expensive in terms of transaction fees.