The Trade-Off With Stocks
For those who invest in stocks, often in choosing your alternatives you are faced between a high-growth company and a mature company. The high growth company offers much upside potential at the price of a higher Price-to-earnings (P/E) multiple, whereas the mature company has less growth potential and its P/E multiple is lower and more reasonable. To compensate investors for the limited growth, these organizations pay out quarterly dividends.
It is not often that you find stocks for companies that offer both immense growth and a high-paying dividend. It is a trade off. But what about other asset classes, such as my favorite?
Apartment Syndications
I recently made the decisions to invest in a real estate private fund, which raises a certain amount of capital to acquire multiple asset classes that meet the predefined criteria. That fund offers the same high-growth of any direct investment opportunity where there is value add potential, but also offers partners an 8% preferred return. As I was outside in the back yard playing with my children, the thought hit me: what stock pays an 8% dividend and offer so much potential upside at the same time?
Consider Diversification
For people who are primarily focused on stocks, it is time to take diversification seriously. Consider allocating some of your investment portfolio to real estate. There is no doubt that people can do well with stocks, but often there is that trade off of growth versus dividend income. In real estate you can have both, including insane tax benefits!
The benefit of the stock market is easy access to thousands of investment options for anyone, which makes stocks very liquid. Because of this liquidity, pricing varies every day in the market place. Every other day your investment is “gaining” or “losing” many percentage points in value. Multifamily real estate is valued more stably and simply based on market cap rate of the net operating income of the asset. This means that while values change over time, they do not fluctuate every day putting your money at risk when you may need it the most.
What is your next investment?
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– How To Use Your 401k To Invest In Real Estate
