Evolution of Diversification

Evolution of Diversification

For as long as investing has been a concept, so too has the 60/40 rule. Foundationally the 60/40 rule means to have 60% of your investments into higher risk higher yield investments like stocks, and the remaining 40% of your investments into lower risk lower yield investments like government issued bonds. Over the years this strategy has worked for many investors looking to secure and boost their income and their retirement savings. However, over the past few decades the investment world has seen vast changes to its landscape, and these changes have created new opportunities for a newer more evolved version of the 60/40 rule. Now the biggest sector driving this force for change is Real Estate.

According to lectures from Harvard Business School, Real Estate accounts for roughly $190 trillion dollars in the investment world, and it is the only asset to show continual growth over time. Stocks will rise and fall, but Real Estate rises. Because of this, Real Estate is pushing back against the 60/40 rule as it proves the potential for yield with safety as opposed to achieving one over the other.

Keeping all of that in mind, lets explore a few ways Real Estate offers that yield with safety. First and foremost, there is the option of owning the properties themselves. Offering a multitude of different ways to monetize on the asset as it also grows in value, this option provides absolute control over the asset to the investor. Conversely, your capital is tied into that property until you sell. As with any investment, it is always best to consult a licensed investment advisor. While we at Secured Investment Corp are experts in Real Estate, we are not licensed investment advisors. But we are here to share the basic principles of how Real Estate works.

Next, lets explore notes. Owning a note essentially means you are the bank. The borrower makes monthly payments to you until they either sell the asset or refinance to pay you off. Notes can be originated on traditional owner-occupied properties (although this option typically comes with a lower yield) or non-owner-occupied investment properties (typically comes with a higher yield). On the non-owner-occupied front, you lend your capital to other investors so they can buy fix and flip or buy fix and hold properties. Notes of this nature often come with interest only monthly payments with a balloon payment due within a 24-month time frame. Like owning the property yourself, your capital is tied into this single deal until the borrower repays you.

Both of these options bring Real Estate into your portfolio and can provide the yield with safety that you are striving for. But what if you do not want to directly own or manage these investments? Can you still partake in the yield that Real Estate offers? Absolutely. If this is the case for you, then exploring different High Yield Private Equity Funds may be a solution. These Funds offer the ability for investors to take advantage of Real Estate’s potential yield while offering further diversification with less effort from the investor. While every Fund will have varying specifics, you can expect them to offer diversification by way of notes and or assets. Meaning, they originate notes on their Fund and potentially even hold assets themselves through the Fund. Each Fund will provide different payout structures and holding periods, but if you are a passive investor, whether you are utilizing liquid funds or retirement funds, a High Yield Private Equity Fund could be an option for you.

Again, we at Secured Investment Corp are not investment advisors so you should seek investment advice from such a person. With that being said, we do offer different investment options here. We have a revolving portfolio of 100’s of notes and High Yield Fund opportunities for all investors. Click the link below to schedule an appointment with one of our team members to discuss the different options for you.