I get this question a lot…
“Billy, do you believe in widely diversifying your investment portfolio?”
I’ll let a better-known investor give you the answer. Warren Buffet says wide diversification is only needed when investors don’t know what they’re doing.”
I happen to agree with Warren. When you invest in something you are looking to gain or profit; when you diversify the wrong way you are looking to stand still and won’t gain much of anything, because one side may counter the other.
What I mean by that is when you diversify using different vehicles in the same asset class, one may do really well and one may do really poorly. Then what? Did you move ahead or did you just stay where you are financially? Likely the latter.
When you invest in something you are looking to gain or profit; when you diversify the wrong way you are looking to stand still and won’t gain much of anything
So why would you bet your life’s savings and retirement on that strategy? (Maybe you’re afraid to take action by investing in different vehicles.)
I talk a little about this in my book, which if you haven’t grabbed yet… do it now, because it’s a great investment in your time to read it!!
The fear of losing keeps you from ever winning.
That’s an old saying, but it’s perfect for any age.
If you are always fearful of losing your money, for example, by THINKING you’re being very careful by keeping all your investment eggs in one asset class basket, you may end up with a very small nest egg at the end.
Maybe because you are fearful of making decisions yourself about your investments and retirement planning, you’ll put your retirement savings in the hands of a financial planner, because that’s what you’ve heard is safe. (That’s one way nest eggs end up being broken.)
While I have nothing against financial planners really, I disagree with their basic assumptions, because they have everything to do with diversifying, but in the wrong way.
While a lot of financial planners will tell you to diversify your portfolio, the smarter planners will at least include a REIT, which involves real estate and typically does okay. But if that is checked against losers like so many stocks and other paper assets, well, you aren’t moving forward. (Plus, your financial planner gets paid either way, so you need to consider whom you are letting make your decisions for you.)
Instead of diversifying across different vehicles in a single asset class (like stocks and bonds), why not add investing in real estate to the wealth-creation stew and diversify across asset classes? That’s way different from diversifying into different stocks and paper assets.
Let me explain…
To help you better understand what I’m talking about, I did a quick livestream on this topic. If you missed it, please watch the video now:
If it’s about the destination – in this case we’re talking about getting to a comfortable retirement where we don’t have to worry about covering costs and where we can actually enjoy our time – how are you going to get there?
Why not add investing in real estate to the wealth-creation stew and diversify across asset classes? That’s way different from diversifying into different stocks and paper assets.
Let’s say you choose to get to a specific destination (like to Charlotte, North Carolina, because where I like to invest and I go there from time to time). Does it make any sense to ONLY choose one form of travel by which you’ll get there?
There are lots of good vehicles from which to choose!
If you choose one form of travel, like a car, it could be a Volvo, a Toyota or any other brand of automobile, right? You’ll get to your destination at about the same speed and you’ll arrive in exactly the same way… in a box on four wheels. But that’s only one form of travel, and it may not get you to your destination fast enough or in the most direct way.
Wouldn’t it be better to have more choices, like taking a boat, a train, a plane AND a car? Check out asset classes “vehicles,” which are…Tweet
Maybe that’s why they call asset classes “vehicles,” and they are…
Those are the four primary investment vehicles.
If you are really going to diversify, you need to understand these asset classes. Do your homework; don’t let someone else give you only one choice to get to your destination. And for goodness sake, please use real estate as an investment vehicle. I know no other asset class that brings the consistent returns that real estate does!
This is a pretty big topic for a simple blog article. So, if you want to find out more about the different asset classes and how to use real estate to compliment what you may already doing in investing to create a comfortable retirement, give me a call or reach out to me through my website at www.KeePonCashflow.com.
And don’t forget to find me and follow me on all our social media pages and channels!! You can do that easily by clicking the icons you see on this site.
In this livestream I mention the Cashflow games I run in Barcelona. If you’re in the area, please join me. I’ve set up two Meetup groups, one for games I host in Spanish and one in English!!
Maybe I’ll see you there!