Building your wealth
How to build a healthy portfolio with lower-risk investments
“Make money fast.” It’s the siren song that causes far too many people to invest their savings into trends. Even cryptocurrency, for all its promise, can’t promise a high rate of return—at least not yet.
What’s the average investor to do, then? Two things come to mind.
First, execute patience. Staying on top of personal finances for the long haul requires some determination. Scott Shrum, president and COO of Hennessey Digital, is fond of a quote coined by Jack Bogle, Vanguard founder: “Forget the needle. Buy the haystack.”
Consequently, Shrum believes in putting certainty and steadiness over hype. “Buying a basket of stocks — and then holding onto it even when the market drops — always wins out in the long run,” he says. “This gap in performance isn't slight, either — passive investors outperform their more active counterparts by six to seven percentage points per year.”
Remember: Most worthwhile investments don’t pan out in the short-term. Rather, they keep growing at a steady rate over years, decades, or even a lifetime.
Secondly, look for suggestions from people who’ve been-there, done-that. These don’t have to be individuals in the banking or Wall Street industries, either. Anyone who’s been a successful personal or corporate money manager can speak intelligently about preferred routes to building wealth safely.
Below are several recommendations from smart professionals to get you started on building a diversified, healthy portfolio.
The old saying still rings true: “If it sounds too good to be true, it is.” That’s why John Hall, CEO of John Hall, focuses his money on low-risk investments. As such, he eschews day trading and stays out of the bitcoin fray. Instead, he concentrates on finding vehicles that will help his family achieve their objectives.
For instance, Hall recommends putting dollars into college funds. “If you’re a parent like me, you’ve probably been looking out for your kids from the very beginning,” he explains. “Investing in your child’s continued education is a helpful investment.” Some funds, like 529 savings accounts, can offer tax benefits, too.
Of course, not all young people decide to continue in higher education after high school. Hall acknowledges that fact by doubling down on his strategy. “Should your child choose not to go to college, the money can be repurposed to another beneficiary who wants to go to school,” he says. That could include another child, a spouse, a relative—or maybe even you.
Though flipping properties can be a danger for dabblers, real estate can also be a winning way to add wealth. After all, land is finite, which makes it valuable. Plus, you may be able to accrue money over time if you’re willing to take the landlording route.
Kurt Carlton, co-founder and president of New Western, sees long-term rentals as an attractive secondary income source. According to Carlton, “Long-term rentals can be a great way to earn consistent passive income while the value of your property continues to appreciate.”
Is there a risk associated with buying and holding real estate? Absolutely. But as Carlton points out, “In general, land and property tend to appreciate. That’s one of the reasons why real estate has ranked as the top investment pick for the majority of Americans since 2013.” Just make sure any property you purchase is reasonably priced and likely to increase in market value.
Misty Larkins, president of Relevance, knows how exciting investing in stocks can be. Still, she prefers to take a longer view with her money. “Trending stocks do just that — trend,” she says. “Then they plummet, which leaves you with a significant investment that you’ll likely never have a return on.”
What’s Larkins’ alternative to socking away dollars in stocks that might tank? She’s a firm believer in 401(k)s and related vehicles. And she’s not swayed by the fact that a 401(k) lacks the sizzle of a stock’s ups and downs. “I don’t care how boring it is because planning is a priority for me. The better I can plan well into the future, the less I need to worry later on,” she says.
Yenn Lei, head of engineering at Calendar, agrees with Larkins’ approach. “I’ve seen so many people who were too quick to invest in things like GameStop stock,” he notes. “Popular stocks only do well because they get talked up. I’d much rather be investing in something long-term, like life insurance. It’s a more thoughtful investment that goes a long way for your loved ones in the future.”
The founder of ETL Robot, Steve Gickling, rounds out Larkins’ and Lei’s conservative, security-filled, “golden years” approaches. “I would rather invest in something that’s going to help improve my future,” notes Gickling. “Having something like a fixed annuity is a wise, low-risk financial investment. If I were to use one, I would be thanking myself when retirement funds run out, because I would still be receiving a life-long continued income.”
Everyone moans and groans about the rising cost of healthcare. However, many people forget about an investment route to lower their overall care costs: An HSA.
Many employers offer HSAs, or health savings accounts, to their employees as benefits. Yet workers often forget that HSAs can be seen as a type of wealth-building tool. “It’s not a typical place you would think to look, but it pays off in the end,” explains Stephen Dalby, founder of Gabb. “You gradually add money to your HSA over the year and can use it for health expenses, including over the counter drugs. Add the maximum amount you’re allowed to annually and save what you don’t use for your future retirement or a larger-than-expected medical bill.”
Still interested in putting some dollars toward trends that seem ready to explode? Rather than going with a fad that’s wholly unproven, find one that’s shown stability and longevity. Take the senior care industry, for instance. It’s an investment consideration that attracts Jason Zuccari, vice president, business development and external relations of Hamilton Insurance Agency.
“Investing in the senior housing vertical, via real estate or insurance, is certainly not as provocative or exciting as dogecoin, but it is a sure long-term bet,” explains Zuccari. “Demand in the senior care industry has seen steady growth and that trajectory is forecasted to continue upwards as better healthcare translates to longer life spans.”
Chalmers Brown, CTO of Due, feels similarly. “Investing in a very low-value cryptocurrency with long-term growth expectations, like IOT (Internet of Things), is wise,” says Brown “Since the world is becoming increasingly reliant on the Internet of Things, this is a more stable investment that is expected to grow steadily through the years as devices that utilize IoT are expanding across the globe.”
Most people who are sitting comfortably haven’t treated wealth management like a trip to Vegas. They’ve taken time to invest wisely and look ahead to the future. As tempting as “get rich quick” sounds, it’s never as comforting as growing money safely feels.
The contents in this article are being provided for educational and informational purposes only. The information and comments are not the views or opinions of Union Bank, its subsidiaries or affiliates.
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