There comes a time for business professionals to invest and gear up for a financially strong future. Stocks, bonds and mutual funds are often the common and prudent choices to an investment portfolio.
However, smart savvy investors and financial pros alike recognize the value found in alternative investment opportunities to keep their portfolios diversified so as not to have all their eggs in one basket.
Financial experts concur that diversifying your portfolio is a must in current times. Today, we face market uncertainty, rising interest rates and inflationary pressures.
Here are some tips for individuals seeking alternative investment advice:
REAL ESTATE: A MULTITUDE OF INVESTMENT OPTIONS
There is an old investment adage usually attributed to Mark Twain: “Buy land, because God isn’t making any more of it.” In addition to buying real estate, lending on real estate is another way to take Twain’s advice.
Investors should remember that real estate can be very cyclical. Should investors choose to invest in that market, they need to be both comfortable with and understand its cyclical nature.
There are various types of real estate investments; some investors prefer office buildings as an investment vehicle, while others see residential housing or apartments as a preferred route.
Another way to invest in real estate is to become a private real estate lender. This is where an individual or a group of individuals come together to make one loan to a developer. These loans are called trust deed investments. Investor funds (interest and principal) are usually re-paid directly to them. When your trust deed lender also services your loan there have been instances of funds diversion. That’s not an issue for our clients as investor funds go through a title and escrow company when a loan is made, and we utilize third-party servicing companies to collect monthly payments for our private lenders. NV Capital never touches your money. Trust deed investing rule of thumb No. 1 is do not put more than half of your investible funds into trust deed loans. We all remember the economic meltdown of 2007 and 2008 and while we hope to never experience a period like that again, we continually remind our investors to maintain the 50-percent rule.
A DIVERSIFIED PORTFOLIO: THE BEST DEFENSE FOR YOUR INVESTMENTS
As we’ve all seen in recent weeks and months, the stock market can be volatile. Markets rise and fall, and there are many factors that can — and do — impact the health of the stock markets at any given moment. While stocks can be an important and integral element of a solid investment strategy, it’s also vital to ensure that investors do not solely rely upon the success of their stock holdings. Other investment vehicles, particularly the bond market, mutual funds and even cash reserves, are worthy of consideration when constructing a diverse investment portfolio.
Even within investments, diversification is important. For example, if an investor has decided to invest a certain amount of funds in the stock market, it is important to consider diversifying stock holdings. Depending on the investor’s comfort level regarding risk, he or she may wish to consider investing in small cap, blue chip or foreign stocks. Regardless of the final choice, ensuring that the portfolio is diversified is critical to minimizing the risk of any given investment.
IN THE WORLD OF INVESTMENTS, ONE SIZE NEVER FITS ALL
Successful investors understand the importance of personal knowledge and research. Every investor has financial goals and objectives that are unique, and as a result, no single investment strategy is appropriate for all investors.
While an investor may not possess the deep insight of investment professionals, a smart investor is willing to commit the time and effort required to explore multiple investment options.
Even those charged with oversight of the investment industry acknowledge the importance of a diversified portfolio. According to the Financial Industry Regulatory Authority (FINRA), by diversifying your investment portfolio your “aim is to manage your risk by spreading out your investments … both within, and among, different asset classes.”
There will always be an element of risk involved when investing funds, no matter the nature or size of the investment. However, performing due diligence about your potential investment, along with a well-diversified investment portfolio, can lessen the risks and optimize the possibility of prosperity regardless of whatever obstacles may arise.
John Blackmon is the manager and broker of NV Capital Corp., specializes in private lending, aggregating clients’ investment dollars together to fund loans on Nevada real estate.