Real estate investment trusts, REITs, are a convenient way for inexperienced investors to gain exposure to real estate investing, especially for the first time. Modeled after mutual funds, publicly traded REITs purchase, own and manages real estate properties. REITs give individual investors the opportunity to invest in a portfolio of income-producing real estate. Investors do not need a large amount of time or resources to invest in REITs but for the smart, savvy investor, REITs should never be an option.
Investing directly or indirectly in an asset class is crucial to maximizing returns while reducing fees and volatility in your portfolio.
Direct investing can be done on a variety of different levels. You may directly invest in an asset which may require you to make many and even daily decisions. You may decide to co-invest with a team of experts which will allow you to maximize your returns while not having to make decisions day-in and day-out.
These days there’s a myriad of alternative investments, which one is right for you?
Alternative investments like real estate; commodities; tangibles like gold, art, wine, and stamps; private investments; private equity and venture capital have long been utilized by investors to hedge against stock market volatility. This is because alternative investments are theoretically uncorrelated to the broader stock and bond market and therefore insulated from broad market swings.
Imagine the following two scenarios. In the first scenario, Jack has the opportunity to acquire a goose that lays golden eggs. It will take some sacrifice and a leap of faith to acquire the goose but the payoff could be amazing. But first, he will have to make an important investment decision.
Jack’s investment capital is a dairy cow that has stopped producing milk. He’s been instructed by his mother to sell the cow for cash, which will be put back into the farm that hasn’t been producing so well.
Building wealth is meaningless if you don’t protect it. All it takes is one accident and one lawsuit to lose everything if you’re not adequately protected.
I recently came across an interesting article on Reuters.com that relayed a recent interview on CNBC of Saudi Billionaire Prince Alwaleed bin Talal, who owns investment firm Kingdom Holding where he shared his thoughts on cryptocurrencies like bitcoin. In the interview, Prince Alwaleed expressed his skepticism of cryptocurrencies, warning that bitcoin was like “Enron in the making.”
Chris Rock once said, “Shaq is rich, but the white man who signs his check is wealthy.” – Chris Rock, Bring The Pain, 1996.
So what’s the difference?
What does it mean to be rich vs. what it means to be wealthy? Maybe Chris Rock’s implication is that you can be rich and have a lot of money but still not be wealthy. It’s the business owner, the one calling the shots, the one who doesn’t have to worry about money, that’s the wealthy person.