Aligning Investments to Achieve Your Goals
Two weeks ago, I discussed how investors can achieve peace of mind and additional income through safe, secure syndications. This month's newsletter will discuss how to take advantage of these benefits! The following 4 steps are a good starting point:
Have a clear goal
Never stop learning and growing
Develop a plan to fund your investments
Understand the key private placement documents (these are available as part of my investor education packet)
First, ONLY YOU can decide which investments will help meet your needs! It’s easy to get lost in the swarm of options that are constantly flashed before us. To cut through the noise, it’s crucial everyone pays close attention to their needs.
Examples:
Successful investors match their needs to an investment benefit. Let's look at an example:
Lenny would like a vacation with his family. We will call this a need [:)]. He has options:
Save more money than he is currently,
Invest his money into the stock market with the expectation that investment will go up;
Put his money into a specific self-storage investment that pays $3,200 every three months.
If Lenny has to save $3,200, that is a significant change to his current situation. If he puts the money in the stock market, he will need the discipline to evaluate where to put his money, invest in a specific amount, and have criteria on when he will sell. Last, he will need to hold up part of his money to pay his capital gains tax, if the stock goes up. After all of that, he can take his income once it has gone up enough, and pay for his vacation. He will also have to decide if he sells part of his investment or all of it. Instead, if Lenny put his capital to work in a syndication, he could receive his returns quarterly (remember, forecasted at $3,200 per quarter, while his principle is still protected in the underlying investment).
Education is the next step to position yourself to take advantage of these private placement benefits. Research shows that we learn best through experience. Think back to learning about riding a bike. First, you may have gotten coaching or ideas from a parent or loved one. However, real learning takes place when you start turning those pedals yourself! You may bruise a knee however, through experience you did it! This is true for many parts of our lives like cooking, driving, folding clothes . . . . Why would our financial security be any different? We don’t have to be Lance Armstrong to ride a bike, but we have to get on the seat and turn the pedals.
There are 3 things anyone can do right now to get experience evaluating investments to achieve their goals:
Find an investor who has already successfully invested in a private placement deal. Ask them about their experience, and learn from it!
Look at example deals. I can provide a case study, a list of other syndicators who are doing great deals, or a link to a webinar. By subscribing to other newsletters, listening to webinars, and discussing with others you will quickly build knowledge. Reviewing different deals will highlight how investments align to specific needs.
Discuss with a tax professional/C.P.A. to confirm how these investments will support your goals
To take advantage of the benefits that syndications can offer an investor must develop a funding plan. Many prospective investors get stuck on how to fund an investment. Don’t let that happen to you, there are many different options to consider. Here are a few:
Self-Directed IRA or qualified retirement plan
Leveraging the equity in your home
Diversifying stock, mutual fund balances
Investing savings
The self-directed IRA is often overlooked. One reason is the Bureau of Labor Statistics highlights that from ages 18 to 24, American’s change jobs an average of 5.7 times. Between 25 and 34 years old, they change jobs an average of 2.4 times. The average goes down again to 2.9 jobs between ages 35 and 44, and then to 1.9 jobs between ages 45 and 52. With each of these career changes, if an employee has retirement savings or benefits through an employer, they must decide what to do with those savings. Many individuals will roll funds into another employer-sponsored account when changing jobs.
However, investors have the option of funding a self-directed IRA or a qualified retirement plan. The benefit to setting up a self-directed retirement account empowers individuals to choose investments that align with their goals. They are not locked into a particular set of investments that are selected to drive transaction fees to a registered broker-dealer for pre-selected products.
Other options for investing in a syndication are leveraging the equity from your home to grow and protect your wealth. Many Americans are sitting on more and more equity in their homes, especially with the historic rise in asset prices from 2008 to the present. The equity is only useful if you sell or use it. Many homeowners will use that equity to fund a project around the house like a pergola, outdoor kitchen or some other home improvement. That is great however strategic homeowners invest the equity and use the return to purchase those items and save their original equity. Those returns can provide the opportunity to help pay for a vacation, college tuition, home improvement, or vehicle. This is a strategy that investors can repeat approximately every five years which can help grow and preserve wealth with little to no lifestyle change.
The last two methods of funding a syndication with stock or savings are more traditional. When working with a professional team, a syndication can provide exceptional returns with reduced risk. Too often investors settle for a one size fits all approach of investing in ETFs, stocks, or funds. It’s important to evaluate if your portfolio is providing income for your needs. The common solution is to sell your investments and spend the money. There is no debate that investors want to see positive returns. However, savvy investors tailor their portfolio with investments that send quarterly checks, instead of waiting for the investment to increase, then sell and pay taxes.
Change comes through education, taking action, and applying our knowledge. To learn more, you can download our investor education packet. It highlights the 3 different types of offerings and the 6 documents required for investing in a private placement.
If you would like to learn more or have questions on how to take advantage of the opportunities that private placements can provide make sure to email or schedule a call today.
As always, share the wealth with family and friends. This will help reinforce your education and will likely add significant value to their lives.
-Ben