If you’re an experienced investor or just beginning as an investor, we all share a crucial goal that we share, that is we wish our investments to succeed. However, of course we might have different thoughts about the definition of what “success” looks like. We may also have different expectations for things like the level of risk tolerance as well as commitment to time (i.e. active vs. passive).
Personally, I’ve always think about the Investment Strategy to build an ongoing stream of income that is passive, and I would rather invest in the investments that I know and comprehend. Some may take on more responsibility and invest in projects that require a repair themselves. Yet, regardless of the variations, the two primary strategies that investors can employ when constructing the portfolios they have: diversification as well as investing within your specific niche.
Finding Your Niche + Pursuing Diversification
I believe it’s always wise to put your money into the things you are familiar with, however often, getting the right education and establishing your own niche can take longer than you’d prefer. It’s true that when you are born, you’re able to perform any job you like, but there aren’t all the things you’d like. Your options are limited by your time. Certain kids know precisely what they’d like to become in the third grade, and some don’t even know after they graduate from college. Somewhere, either through design, accident or due to circumstances, you travel on a specific path to earn money.
Certain people go through life-altering circumstances that push them to move from one field to a different. As an example I have a great friend who was a fantastic dentist with an excellent practice, but it was thrown off the rails in days following the onset of an illness that ended the ability of the dentist. He was forced to come up with a new idea. He analyzed his abilities in terms of resources, talent, and network in order to become a finance executive. I have friends who aged and realized that they did not have enough cash to retire So they began looking for passive sources of income to augment and eventually replace their income. I’ve witnessed clients join our classes, having been fired. They get together with other students and discuss ideas for new projects as well as ongoing businesses or niches. and discover things that weren’t thought of for years.
If you’re still trying to figure out your niche, or are exploring something completely new, test your toes in before diving in. Perhaps invest a small amount of money into an investment initially as you’re still learning. With time, you’ll be able to recognize what you’re proficient at. In addition, you’ll have more options in determining which opportunities yield the most profit. There are plenty of opportunities and you need to find the ones that are most suitable for you.
In this case, for instance, some people are drawn to fixing and flip houses, while others want to purchase and lease rental properties or even become realtors to assist people in buying, selling and discover investment properties. For instance, a postal worker in my area is aware of when businesses or homes are in foreclosure or abandoned, or are vacant He also has a list of investors searching for properties that aren’t yet listed and he is paid an “bird dog” fee for discovering these treasures. Evaluate your resources, network and time, as well as your wants as well as needs and capabilities. After this, your options should be reduced to a couple of worthy candidates. Explore and discuss these possibilities as well as educate yourself. Then, test until one or two are obvious winners.
The second main strategy to invest in is diversification. A lot of people (including myself) believe it’s ideal to spread the risk and not put “all your eggs in one basket,” or that is the entirety of your savings in one investment. If you’re well-diversified, if something unexpected happens, your entire portfolio won’t get affected. One method to accomplish this is to examine different asset classes that aren’t connected to each other and evaluate the risk that could cause economic difficulties, such as hurricanes in Florida that could cause damage to your property.
In my situation I own residential and commercial investment properties spread across different geographic areas, in the event of economic developments, natural disasters or terrorism-related concerns, etc. Residential turnover is greater than commercial, but it’s easier to find an appropriate tenant for these properties. Prices for property within Florida as well as Las Vegas dropped 60% during the recession of 2008/2009, and those in the northeast saw substantially less. Furthermore, I own property that could be developed during recessions, when materials and labor are available at bargain prices. Private mortgages allow you to reduce the hassle of owning real property while keeping the safety of an asset-backed investment. When investing in this type of investment the principal risk would be foreclosure and default of the borrower however, in any scenario, I’d buy the property for a lower price.
Another suggestion is to study insurance policies and be aware of the timeframes for recovery since sometimes the unplanned could happen. The pandemic of the year 2020 did not come up in my mind, however in the course of my various businesses, I experienced 30% of the cost for a few days. Certain businesses prospered, while others suffered. What I learned was to consider “essential” businesses and professions. Dentists were stopped dead in their feet. The liquor shops were selling higher than they have ever. Groceries and guns and construction material suppliers were available but faced with a shortage. These factors will be considered in coming years and likely affect changes to the portfolio.
Making sure you are prepared for the risk I have mentioned will definitely aid in diversifying your portfolio. However, it is possible to diversify your portfolio inside what you consider to be your “niche” investment type. For instance, there are a variety of ways you can invest your money in real estate such as rentals rehab deals apartments, single-family homes, apartment complexes garages, commercial, land and many other options. Additionally, you can diversify your portfolio by lending money to real estate or purchasing tax-free lien.
Creating My Portfolio
Personally, I’ve employed both strategies to create my portfolio of investments, and every deal, regardless of whether it was within my field and/or not was an educational experience. I’ve tried a variety of things over my life (stocks bonds, bonds, mutual funds commodities, options, including blackjack). I bought training courses that taught me how to navigate the market for equities, but with no success. I stayed away from bonds and stocks for a variety of reasons, such as ignorance and inability to achieve success. It was simply not my thing.
My parents have been involved with real estate for a long time, so I naturally gravitated in this direction. It included single-family and land homes at first, and then branched into commercial office spaces multifamily, industrial warehousing, and multifamily and a variety of diversification within the real estate industry. Furthermore, I focused on geographical diversification, having properties across 8 states. I also diversified by purchasing real estate and raw land, as well as owning petroleum wells located in Wyoming. Based on the tangible assets I was familiar with and understood, I set out for ways to simplify and increase the diversification by utilizing private loans and tax lien ties with real estate. It was a natural progression. The majority of investments were successful, however some were not as successful as other. The amount of time invested in the investments, returns on investment, risks etc. have been assessed over time, and my strategies are modified for family changes, lifestyle changes, and economic shifts. The strategies aren’t fixed, and I don’t think that there exists any “set it and forget it” method that will last forever.
Additional diversification was made possible by utilizing tax-favored plans, and legal entities to offer security for assets. After some investigation, I was also interested in precious metals due to meeting wealthy people on a cruise. They stated, “Throughout history the wealthy have invested in real estate, gold, and artwork.” For instance, physical gold is traded in 158 countries and can be easily altered. The investment in precious metals is a means of storing wealth.
All in all, I concentrated on my area of expertise (i.e. Investment in Real Estate) but also tried diversifying within the same asset class by experimenting with different alternatives to investing. This strategy has I did that worked for me. No matter where you are on your journey to build wealth, the strategies you’ve learned are applicable. Have you decided on what are your “niche” investments? If yes, what are you doing to diversify your portfolio without focusing on these investments?
