I’m sure many of you can relate. You have a corporate job that pays you a respectable income. You set a budget and stick to it, which allows you to set aside a portion of that income to save for your retirement. You know that piling money into a savings account will not provide the retirement that you would like, so you decide to put money into your company sponsored 401(k). Heck, they might even match your contribution up to a certain amount, so why not?
This can be a great way to start investing in your future, but the problem is, the traditional retirement plan offered by your company only offers options that are tied to the ups and downs of Wall Street. You now find yourself allocating a large percentage of your investment portfolio to the stock market.
But what can you do?
I’ve been there (and still do invest a portion of my income in the stock market). I wanted to diversify my portfolio but wasn’t sure how. I thought alternative investment opportunities were only available to the extremely wealthy or well-connected. Not only did I not realize all the options that were available for a “regular” guy (busy professional, father, husband, etc), but I had no clue how accessible these investments were. I knew there had to be a better way to grow my wealth, so I started reading business and finance books, listening to podcasts, attending local investor meetups, and using the internet to learn as much as I could about the different options out there. The biggest takeaway that I want you to get from this is that there are a ton of options out there beyond what you are sold from your traditional financial advisor. That’s not to say that investing in those vehicles is bad. Like I said, I still do it myself. However, if you’re interested in exploring additional options, here are a few to consider.
Those of you that know me know how much I love investing in real estate. There are plenty of resources that provide thorough insights on the benefits of investing in real estate, so I won’t labor that here. Even within the real estate umbrella, there are seemingly countless ways to invest. There is the fix and flip, buy and hold, BRRRR, apartment investing, self-storage, note investing, and land development to name a few. Check out the Bigger Pockets forums to research different topics in real estate, though be careful. Like anywhere else on the internet, there is a lot of misinformation mixed with the valuable content.
Angel investors provide capital to startup businesses. They usually get involved very early in the life of the business, typically in exchange for equity in the company. Many high net-worth individuals achieve significant returns using this strategy, but it can be very risky. Many times, these investors are providing capital to unproven businesses with unproven leaders. It can be a very rewarding way to invest, but make sure you do your research and understand the risk.
I’m sure you’ve heard of Bitcoin, but there are many other cryptocurrencies out there that seem to be growing in popularity. It only takes a few minutes to set up a crypto wallet and begin to invest. But PLEASE, do your research! I own some crypto myself but am far from an expert, so I will leave the research up to you. There is a wide variety of resources out there, but here is one place to start.
This less known strategy is more than an investment strategy. “Infinite Banking” (aka a variety of other names) is a way to use dividend producing whole life insurance policies to store your capital. Think of it as more of a super-charged savings account than an investment. This is definitely not a get-rich-quick play. This is a strategy that takes time to properly fund and get to a point where your money is really working efficiently for you. But when it does, it can be very powerful. One positive about using an “Infinite Banking” policy, is that if set up properly, you have access to your capital through policy loans while that same capital is compounding interest. So, you can use the cash value of your policy to make other investments or fund major purchases, while your money is still providing dividends as if you didn’t take out the loan. If done properly, you can have your money working for you in two places at the same time. I must stress again that it is important to do your research and make sure your policy is set up in a way that works for you. You can not just set up a typical whole life policy and receive these benefits. It must be set up in a specific way, by a trained professional. Feel free to email me if you would like a few book or podcast recommendations on the topic.
Self-directed Retirement Accounts
So, you say you have a lot of capital tied up in an IRA? Not a problem. Many times, you can roll those funds into a retirement account that allows you to invest in a wide variety of asset classes not available inside a traditional retirement account. And you can do so without creating a taxable event. There is a variety of options such as the Self-directed IRA, Solo 401k and Qualified Retirement Plan. If you would like to learn more, read a previous article that I wrote on this topic here.
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Written as part of the Multifamily Scrum Series by Adam Lacey