On Wednesday, I published this post about hitting your retirement goals and two important factors that go along with it. I received similar questions from two individuals in regard to asset allocation, which I want to address today.
Most people, when talking about investing think about two things, even if they are not in investing:
- Stock market
- Real estate market
However, there are several other places you can look into and while it is important to do your own research, what I dispense here are thoughts for you to look at how you can grow your portfolio aside from stocks. You could just do a quick google search, but here I’d like to discuss four points, including the second one above because I’d like to give you some insight into that.
First, let’s talk about this. I know it’s in the former post, and it’s something where most people shrug because they either have it (own it or are paying a mortgage) or they don’t because it’s too expensive as banks won’t dish out the money, or you may not have the average 20% down payment to help finance it. Either way, this one varies country by country and even region by region.
There are a variety of ways to go about real estate.
- You can purchase it for your own use speculating that property prices and housing will rise over time, hence giving you a return on top of your mortgage payments.
- You can buy a property with the goal of renting it out and creating a “passive” income.
Now, if you want to invest in real estate, you do not need to outright purchase something. The most important factor is doing your homework. Yes, over the long run, investing in real estate is a good strategy for building wealth because it typically provides both incomes (renting) and hopefully price appreciation, however, that can also go south fairly fast (2008 anyone?). Either way, a great alternative for the average person to get into real estate as well is by investing in so-called REITs (Real Estate Investment Trusts). Hence, you become a passive real estate investor. A REIT is simply a pool that gathers investor money to purchase, and potentially operate, different forms of property. Therefore, you do not need to buy a whole house or apartment building. You can invest X sum into a REIT which will take all the active hands-on activity and pay you a return based on your investment sum. You can purchase REITs over many stock exchanges or purchase projects directly through platforms like Fundrise. I won’t dish out what to invest in. The most important thing to note here is to consider your risks and strategy in real estate along with your overall portfolio before actually investing.
If you like investing and want to be part of ideas and companies you think are amazing outside the stock market, then you may want to look into becoming a VC.
There are many companies who have had amazing growth within the early stages of their development, long before they appear on any market. These are the potential unicorns of tomorrow. The ones who reach crazy valuations before doing an IPO.
So if you have a bundle of cash lying around and do not want to invest in anything else, you might want to look into this route. And there are a few ways to do this aside from becoming a licensed VC and establishing your own business. Today’s day and age allows you to utilize the internet and many platforms like StartEngine or SeedInvest or MicroVentures. These are equity crowdfunding platforms that allow you to invest like a VC for fairly small amounts.
Now, this is not something on many people’s radar. It certainly wasn’t on mine until many years ago my wife introduced me to what we consider a great painter. I fell in love with the abstract. However, you may consider investing in art.
Privately held art collections may provide nice returns outside the market, however, the catch is it needs to be unique, and it needs to be a potential name in some form or fashion. Who doesn’t want a Banksy? Or don’t you want CryptoPunk NFT?
The thing here is that Art, albeit the big names you may know, is a type of investment that is illiquid, unregulated, and ultimately really subject to societal taste changes. An artist may be in today, and out tomorrow. Only a few hold legendary cultural titles.
Lastly, however definitely not least, and something close to my heart is a personal investment into yourself. Continuing your education, whether an online course, a certificate, reading a book or two and practicing becoming a subject-matter expert, or actual micro or university degrees. An investment in improving your own skills can always be worth it in the long run. Oftentimes, your employer may even be willing to help cover certain costs by reimbursing you.
I truly believe in upskilling. Whether you become an expert in something specific or a jack of all trades, enhancing your own scope of knowledge and tools can and will be beneficial for anyone in nearly any industry.
So give it some thought. There are a variety of options out there, free and paid.