BiggerPockets Money Podcast

BiggerPockets Money Podcast 144: Alternative Investments: How to Determine Which Option(s) Are Right For You with Kirk Chisholm

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Kirk Chisholm is a fee-only investment advisor with a secret passion – finding new and different ways to invest money.

Kirk shares his Big List of 75 Alternative Investments with us today – and more importantly, how to vet the investment vehicle to see if it’s right for you.

Not everything is a great fit for every person, and you certainly don’t have to choose everything on the list. Play to your strengths when choosing investments and don’t discount passion for an idea. If you HATE the thought of learning more about that investment vehicle, you won’t put forth the correct amount of effort necessary to master it.

Kirk also dives into how to sell these types of alternative investments – including at significant discounts if it’s an illiquid asset that you need to liquidate fast. Secondary markets exist for all asset classes, and there are ways to pick up a good deal on the secondary market as well.

If you’re looking to diversify your portfolio, today’s show is a can’t-miss episode!

Click here to listen on Apple Podcasts.

Listen to the Podcast Here

Read the Transcript Here

Mindy:
Welcome to the BiggerPockets Money podcast show number 144, where we interview Kirk Chisholm, from Innovative Advisory Group and discuss alternative investments.

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Kirk:
I think real estate is a great overlay for all this conversation even though we're trying to talk about alternatives. If you're buying real estate, it's illiquid. If you have to sell, you're going to get a crappy price. If you have to buy, you're going to get a crappy price. If you're patient, like in around here in Massachusetts, and most places in the country, it is a seller's market.

Mindy:
Hello. Hello. Hello. My name is Mindy Jensen and with me as always as my smashing co-host Scott Trench.

Scott:
Wow. What another forceful introduction from Mindy, thank you.

Mindy:
Scott and I are here to make financial independence less scary, less just for somebody else and show you that by following the proven path, you can put yourself on the road to financial freedom, so you can get money out of the way and live your best life.

Scott:
That’s right. Whether you want to retire early and travel the world, go on to make big time investments in assets like real estate or alternative options like mineral rights, structured settlements, or 73 more, or start your own business, we’ll help you build a position capable of launching yourself towards those dreams.

Mindy:
Scott, I’m super excited for today’s show, because we’re talking to Kirk Chisholm. I’ve known him for several years. He’s an advisor, a financial advisor, who has a passion for alternative investments. I’m not talking about Bitcoin, oh, wait, I am talking about Bitcoin, and horses, and mineral rights, and all sorts of things that you didn’t know you could invest it, or at least I didn’t know you could invest in.

Scott:
Yeah. He has a great framework and wealth of experience investing in these types of things. I just learned a ton from Kirk today. I’m excited to bring him on.

Mindy:
I am super excited to bring him on, too. We don’t get into the ins and outs of the individual investments so much as the framework and the mindset around what you need to be thinking of before you jump into these alternative investments. Everybody has that hot new investment that they heard from somebody, but you really need to know what you’re doing in order to make these investments work.

Scott:
Yep, absolutely. I think that this is a great introduction to this concept.

Mindy:
Kirk Chisholm, from Innovative Advisor Group. Welcome to the BiggerPockets Money Podcast. This is super exciting today, because we’re talking to you today about alternative investments. Everybody knows the stock market. Everybody knows real estate. Everybody knows bonds and my feelings on bonds, I don’t like them. But we’re going to talk about alternative investments. When I was talking to you a couple of weeks ago, you told me you had this big list of alternative investments. My thoughts, always got four or five. But you don’t have four or five. You’ve got a ton of alternative investments. Some of these are really, really cool.

Kirk:
Yeah. I would agree with that. I love what I do, Mindy, because it’s so much fun to find new alternate investments all the time. I put this list together. There’s more that aren’t even on this list. Every time a client calls me and says, “Hey, I want to do this.” I’m like, “That is the coolest thing I’ve ever heard.”

Scott:
Well, can we get a quick intro? How would you describe what you do? How would you describe what an alternative investment is for those listening?

Kirk:
I'm a wealth manager. A investment advisor. A fee only investment advisor. We got into this space, because we were doing traditional investments, and not that they're boring, but there were so many things outside of that, that piqued my interest, real estate being a big one of them. As I look at alternatives, and let me clarify, answer your question with alternatives. The way that Wall Street defines alternatives is different from mine. The way they define it is it's something outside the box, which to them their box is a mutual fund. Is it a stock? Is it a bond? Is it a mutual fund? If it's not, then it's an alternative.
They usually characterize it as like a hedge fund. I think that’s such a narrow scope for what alternatives really are. Based on their characterization, real estate would be an alternative. I don’t think too many people here would consider real estate and alternative. The way I characterize alternatives is really, in some ways, it depends on the person. If you only invest in CDs, a stock may be an alternative. But the way I characterize it, just to simplify it is there are investments that are not securities. They’re outside of the stock market. Now that could be horses or real estate or tax liens or a private company that’s not listed on exchange, anything except for stocks, bonds, and mutual funds really are what I would consider alternatives.
I think true alternatives really the point of considering them and I just want to make this point. The point of considering real alternatives is not that they’re different or they’re better or they’re riskier or you can put a lot of labels on them. The real point is If you’re putting together a portfolio, let’s say you’re a real estate investor, and you have 20 different properties, well, you want 20 different properties, because if one of them, something happens to it, you’ve got 19 left to help support the cash flow. Just like a stock portfolio, you don’t buy one stock. You might buy a few mutual funds or an index fund or you buy multiple to reduce your risk.
Well, the problem with the stock market is everything has a very close correlation. It would be having two properties that are next door neighbors to each other, and then you have a tornado goes through the neighborhood. You have these diversification is low correlation. Alternatives provide that, because the stock market is not related to, let's say, a rental property or a tax lien or horse. There's very low correlation. The point is, if one of them doesn't do well, it should not strongly affect the other one. That's really why you want to consider alternatives in general.

Mindy:
Okay. I'm looking through this list of alternative investments. At the top, we start off with real estate, there's residential real estate and commercial real estate. Within the real estate space, I mean, just the overall comment, real estate, I think most people think residential, rental real estate. But there's, I think, the first, I don't know, 10 or so are actual real estate investments that are diversified out from real estate.
Some of these are pretty interesting, storage units. I think storage units are a great investment. I read an article, I’m dating myself in 1995, in the Chicago Tribune, that said, “People have so much stuff. They don’t want to get rid of it. They can’t just throw it away. They can’t afford a bigger house. They go and put it in a storage unit.” Well, when you go to your storage unit, never … people will put stuff in there. The storage unit sets you up with an automatic credit card.

Scott:
If you’re watching YouTube, you can see that Mindy does not have a storage unit.

Kirk:
Also, for reference, Mindy, read the article when she was five years old.

Mindy:
Yeah. Yeah. That’s it. I read it when Scott was five. But yeah. When you get a storage unit, they set you up on an automatic monthly credit card billing cycle. Who checks their credit cards? Who checks a credit card statements, literally no people. I shouldn’t say that. That’s not the correct use of the word “literally.”

Kirk:
Everybody who listens to BiggerPockets Money checks their credit card statements.

Mindy:
Yes.

Kirk:
Have they used their credit cards?

Mindy:
But so many people don’t. What’s an extra $100 on $1,000 credit card bill? Oh, whatever. Yeah. I guess I spent that much. I’ll just pay it. It’s this vicious cycle, almost like a gym membership. If you don’t go, they put you on this automatic cycles or automatic billing cycle so you don’t forget to pay, because you never would pay if you didn’t go. Anyway, I love storage units for a lot of reasons. If you’re not convinced about storage units, call up the three storage units in your area and ask if they have any vacancy. Chances are, the answer is going to be no, or maybe I have one coming up at the end of the month, or I just filled my last one.

Scott:
Just to chime in here. We have 75 units on this list. For example, we're talking about real estate, we've got residential, commercial, industrial, tax liens, private mortgages, flipping, lease options, those types of things. We can't possibly get into all 75 in detail. This is more of an exploration of the concept of alternative investments and how to go about giving them. Kirk, what is your framework for approaching this overwhelming landscape of opportunity in the world of alternative investments? How would you introduce someone who's thinking about getting into this, to the concept?

Kirk:
Well, it’s a great question, because I think that a lot of people see this, they have this shiny object syndrome. They hear about something and they say, “Ooh, that sounds sexy. Let’s do that.” Or, “Oh, there’s another shiny object over there. Let’s do that.” It doesn’t matter if it’s alternatives or the stock market. I mean, this is what the stock market is. It’s one big casino with bells and whistles and shiny lights and things moving around. People get hooked into that that shiny object syndrome. Alternatives is no different. They’re not better or worse than any other investment. They’re just different. Every single one of these has its own pros and cons.
Mindy knows one of my favorite assets is tax liens. We just interviewed the tax lien lady earlier this week. We're talking about tax liens. It's one of those asset classes got great risk reward. I love it. I understand it. But it's really complex. You need to really dig into the details to really get good at it. If he just came and just said, "All right, here's $10,000, I'm just going to buy a bunch of tax liens without knowing what you're doing." Well, you could lose your money. I mean, it's just like any other investment. There are risks and rewards to each of these. What's really important is that people understand what the risks are of every investment, and what the potential upside is.
What typically happens with investors, and this is almost any investor, except for … even the professionals get caught in this, is they get sucked into the outcome, their outcome based. They’re looking at what’s the upside here. We take a very different tact. Because what I find is the outcome takes care of itself if you do your work properly. What is rarely ever looked at is the risk. What is the risk of this? You look at a guy like Bernie Madoff, that happened because everyone was looking at the upside, and no one was looking at the risks.
Now, there were a handful of people looking at the risk, but everyone else was just saying, “I’m happy getting my 10%. I don’t care where it’s coming from, as long as I’m getting my 10%.” Which if you think about it, in hindsight, obviously, it makes sense to focus on those things. But people don’t. They just say, “Oh, all right, here’s a perspective. They’re claiming, I’m going to get 10% to 20%. All right, this looks good. I like 10, or 20%, let’s do that.” But they don’t know what they’re investing in.
Now, all of these alternatives, they’re all different. Even though I put flipping houses, lease options, residential real estate, they can be combined. But they’re very different strategies as well. If you’re buying hold verse a flipper, those are different strategies. You may not be an expert at both. You might be really good at finding rental properties. You might do a really bad job at flipping properties. It’s not only the asset, but it’s also the process and the structure of what you’re doing.
When we’re looking at alternatives, there’s a few things to consider. One is, are you an expert in this area? This applies to any asset. Is this what you know, or did you just read about it and some article? If it’s what you’re truly an expert at, that’s really the first step. I mean, Peter Lynch said it best, “Invest in what you know.” If you’re an expert in real estate, and you’re investing in tech companies, maybe you should reconsider your approach. Invest in what you know, that’s the first step. If you don’t know, find somebody or great resources you can learn. That’s really rule number one is you have to understand what you’re doing.
The next thing to do is to look at the risks involved. Are these risks appropriate for you? If you don’t understand the risks, then you probably shouldn’t be investing it. The way we look at risk management is identify all the risks, mitigate as many as possible, and just being comfortable with what’s left over, because you’re never going to get rid of all of them. I mean, you can buy insurance to make sure your house doesn’t burn down. Okay, great. It’s not “No” risk.
The insurance company might decide not to pay you. They might go out of business. I mean, the risks are infinitesimally small, but they still exist. You just need to be comfortable with that. I think most people are the buy fire insurance. They’re comfortable with the fact that it is possible that they couldn’t get paid back, unlikely, but possible. I think that’s really the structure that most people have to consider when they’re looking at investments.
There’s another thing too, which is something we talked about a lot, which is understanding your own investor psychology. Now, this has caused more problems for investors than any other psychological part of investing that I’ve ever seen. Is somebody reads Warren Buffett’s, he doesn’t have a book. But somebody is writing about Warren Buffett, and the best way to invest and they’re trying to follow Warren Buffett. “Oh, that’s great. He’s a really smart guy, let’s do that.” Yet, it may not line up with their investor psychology. If you’re a real estate investor, maybe there’s a part of that that really works well for you. But if you tried to be a day trader and day trade penny stocks, that might not work for you.
I have friends who do that. They trade for a living and they do it well. They don’t try to invest in real estate. It’s a very different investor psychology. You really have to understand your own investor psychology, because two people are not necessarily the same. I know what I’m weak at, and I know what I’m strong at. If I have a weak area, I tried to support that with other things to make sure that I’m not getting caught up in that weakness. You really need to understand yourself. That’s a really important part of this. You can’t just read a book and assume you understand. You have to really understand how you react in different situations.

Scott:
Let’s try to figure out a way to get in the minds of someone who might be listening to the show and think, “Hey, I’m an aspiring investor. I look at the stock market. We’ve talked about index fund investing and why we like that approach, as opposed to day trading here on the money show, because of the … and one way to put it would be the reasonable efficiency of the market and the difficulty and amount of time it will take to invest to exploit the inefficiencies,” maybe your day trader friends are investing in and are realizing.
I’m not an expert in any of these categories. I’m not an expert in real estate. I’m not an expert in oil and gas, LPs. I’m not an expert in franchises. I’m not an expert in diamonds, it can go on. But I’m willing and eager to begin investing time into a learning about one of these categories. How do I approach that? Do I look for one that’s particularly inefficient? Did I look for one that I just like the most? How do I begin diving into these if I’m an aspiring investor?

Kirk:
Yeah. I would say first off, it doesn’t really matter what you invest in. You have to think about what’s your ideal outcome. It doesn’t matter if you’re investing in real estate or horses? What’s your outcome? Are you looking for income? Are you looking for 10% a year? Are you looking for tax write offs? All those things are really important to consider as a start. You need to understand that to begin with. Because if you’re looking for income, and you’re investing in horses is probably not a good idea. Understanding your ideal outcome is a good start.
The other thing I’ll point out is you don’t have to invest in everything. You don’t. We see stuff all the time. To me, it’s just part of the joy that I have in this profession is learning about new and really cool investments. Motion picture, film, tax credits, who’s heard of that? It is one of the coolest things I’ve heard about and it’s next to impossible to get into, because it’s an old-boys network, and there’s, in any given city, there’s two or three people that actually you can … that actually buy them, and no one else is really allowed to participate.
I happen to have a client who was in that space, which is why I know about it. But the point is, is not every one of these is going to be applicable. There may not be an opportunity. I would say the way we look at things which everyone has their own perspective, the way we look at things is we start top-down. We look at things from a global perspective, where are the trends happening, because I want to be involved in a trend. If the trend is SAS companies or as SaaS, software as a service, companies, if that’s a trend, then I want to look for something in that trend.
If farmland is not trending, meaning it’s not doing well, and it hasn’t been for quite some time, number of years, then I probably don’t want to invest in farmland. Now, maybe you do. Maybe there’s reasons to do that. But the point is, you need to look at it from a big picture perspective. You could pick the best farm possible. But if all farms are losing money, then what’s the point of investing in farmland? Your opportunity set is small. You have to understand where the money flows are going, where the trends are going. I mean, given what’s going on with COVID, all of these cloud-based services are doing well. Amazon is doing well, all these companies that are really … that have been trending in the right direction, it just got accelerated.
You want to understand where the trends are just like with real estate. If people are moving out of your city, you probably don’t want to invest in that city. You want to invest in a city where people are moving to. Looking at the big picture is a good start. Understanding where the opportunities are. Then just finding something that you really enjoy learning about, because if it’s painful, you’re going to be spending a lot of time in us. I mean, if you’re investing in real estate, if you’ve never done it before, you’re not going to just pick up a book, read five pages and say, “I know everything.” You’re going to have to dig in. You’re going to probably want to talk to other people, other real estate investors, find out what’s working, what isn’t working. You have to have a bit of a passion for it to really do well at something.
I'd say, having an understanding and like I said this big list is really just to start people's gears working in their brain. There's a ton of stuff in here I would never invest in. It just … I wouldn't. Like wine, I'm not going to invest in wine. I don't know the first thing about it. I like drinking it, but I don't know if I could tell you the difference between $1,000 and $100 bottle of wine. For me, it's probably not a good idea. Artwork, things like that, I mean, there's a lot of thing … payday loans, I actually know enough about that to not do it. But there's lots of assets on here that you can just start digging in and just saying, "Hey, I know a little bit about that. That to me seems interesting and just start doing some research."
I mean, the nice part about the internet is you can find almost anything out there. Some are harder to find, but there’s at least some basic information you can do some digging, like motion picture, film tax credits. There’s not much out there. You can find enough to get the cursory overview. But once you learn enough to say, “All right, that’s not going to work, because I don’t have any connections.” You move on. You find something else.
I’ll give you an example. We just interviewed a guy on oil and gas investing. It was a really interesting perspective. I know enough to be dangerous, but I’m not an expert. This guy’s a driller. He drills wells, tons of wells every year. He knows it inside note. It was an interesting conversation. I’m not going to just pick up and start doing that, because I know how much he knows and how much I don’t know. That’s a reason that I’m just saying, I’m not passionate enough about that to really put the time and to get that good. I think those are some ways that I would start to look at this, is just start to narrow down and just start eliminating things off the list. That’s another way to do it.

Scott:
When we talk about real estate investing, a framework I have in mind for thinking about it is the barrier to entry is not in dollars, but in time. That time investment is probably in the order of 250 to 500 hours of self-education that many invest … and it’s a sliding scale, some people feel comfortable for that, some people need to put in much more time than that, investing their education, learning, listening, meeting people, studying the market, whatever, in order to have a reasonable risk adjusted return of entering into a quality residential real estate project or flip or whatever it is. Do you agree with that framework, generally, for many of these asset classes? Would you say that there’s any that you think have lower barriers to entry or higher barriers to entry relative to other items in this list?

Kirk:
Yeah. The barrier to entry is actually a good point. There’s the time barrier. There’s the money barrier. I mean, if you have $1,000, investing in real estate might be a bit of a challenge for you. I’m assuming we’re doing a buy and rent out a scenario. There are ways to do it. But you’re limited with your resources, and what you can do, whereas you could invest in tax liens, you could buy ten hundred dollar tax liens. You could do that. I think the money part is a big part of it. The time part of it’s also big, because most of us have full time jobs.
If you do, you may not have all the time in the world to do this thing. If you want to invest in storage, self-storage, which I concur with Mindy, great investment. I know around here … I mean, we have a unit, and I’m afraid to give it up, because if we do, we won’t get back, I guess. There’s just nothing available around here. They’re not making much more of it. I think just looking at things that seemed feasible, so I can just go down the list. Airspace rights, all right, that’s probably not on my list. That’s something that would … in New York, maybe in a city like New York where your airspace rights is really important. Mineral rights, not so important here, maybe more in Texas, or some of the oil and gas areas.

Mindy:
And Colorado.

Kirk:
Yeah, Colorado. Yeah. I mean, fishing rights. I mean, you can go down the list and say, “All right, what’s something I can even possibly do?” Horses, not on my list. Livestock, I don’t own a farm. You can go down the list and start eliminating some of these and just look at things that you may have maybe some insight into or some background or know some people who know something. I mean, there’s things like structured settlements are this weird thing. I looked into that 10 years ago. What I realized is, I need to have an attorney on staff because 90% of this is about making sure that your rights to the settlement are solid, and it’s really a court process. I decided it’s just … the number’s just aren’t there to make it worthwhile to do that, because I got to hire an attorney full-time. We’re not doing that volume. Some companies are doing nothing but that and it works for them.
You need to understand what’s required to make it work and you can eliminate a lot of these off the list just based on that

Mindy:
I think that’s really important that you say that pick something that you have a passionate about and really look into that with the attorney thing. I’m not an attorney. I think structured settlements sound really cool. But if I have to hire an attorney to do that, for me, maybe that’s not my best choice. However, somebody listening to this might be an attorney. That might be something that they think, “Hey, I love what is this contract law. I love contract law. Let me jump into this with both feet.” That could be a really great investment for them.
My husband is in love with Tesla. Not just now. He’s been in love with Tesla for a long time. He thinks it’s overvalued now and whatever. He’s been passionately consuming every bit of information and then spitting it back at me about the company and what they’re building plans. Oh! Like last night, he was telling me how they built a factory in China in nine months. But the one that they’re building in Texas, because they did all this work in front, they’re going to build it in four months. I’m like, “Wait a second. We have way stronger building codes than China does. How do you build an entire factory in Texas in four months?”Frankly, I don’t really care about the answer, because that’s not something that revs my engine. Scott, I did a pun. I did a joke. Yay.
There’s a guy who’s got a podcast called Tesla Daily. He worked at Kohl’s, the department store, but was fascinated about Tesla. Now he’s got this top podcast and knows everything there is to know about it, because it consumed him, he would have done the research anyway, even if he never got the podcast, and even if nothing ever happened with it. He just loves it. If you’re going to be real estate, Scott says he’s not an expert on real estate, I don’t know why you say that’s Scott. I think I’m an expert at everything, but real estate specifically, and I love doing the research. I love doing the work. It’s not work. What does that phrase, if you love what you do, you’ll never work a day in your life. I work every day. It’s no big deal at all. I can’t wait to go to work.
I think you do have to have a passionate about it. I mean, you’ve got a list right now that has all these things in it. I can also cross off a bunch of stuff off that list. Nope, nope, nope, not interested in that. But some of these things are super, super cool. You’ve mentioned risk a couple of times. When I think risk, I think I could lose all of my money and go to zero. Are there any investments on this list or just in general, that have a risk of losing more than you initially invested?

Kirk:
I would say potentially a lot of them. I mean, you think about real estate, what if you buy a property, and you don't buy it properly. Now you have to sue somebody, and you come out with nothing, and then you have to put legal fees on top of that. I mean, if you think about a lot of these, mean, that's potentially possible. Now, I think, to your question, if I want to answer it in a different way. If you look at stocks, let's say you buy $100,000 worth of stocks, and then the stock market or the stocks go to zero, you lose all your money, but you're never going to lose more. If you invest in futures, futures involve leverage. Leverage is effectively a way where you can lose more than your initial investment.
For futures, or Forex, another example, you put down 10,000, you can buy $100,000 worth of some commodity. If you’re wrong, and it goes against you by 10% or more than 10%, then you have to put up more than 10,000 to cover your position. Real estate’s the same way, buy a property for 100,000, put down 10,000, and the property value goes down by 30%. Now you owe $20,000, that you didn’t put up. That’s more than you originally invested. I think the key is, if we’re eliminating the legal part of this or any other considerations, you’re just looking at the investment itself. Leverage is the key factor of where you’re going to lose more, potentially, lose more than what you put up.

Mindy:
Okay. That’s good to know.

Scott:
When we talk about some of these investments, and getting into them from a position, maybe where I’m not already an accredited investor, that’s not going to be another one of these. Some of these investments are only available or much more available to accredited investors, even without the financial minimums that you have to put into them just because of SEC regulations. Do you have any frameworks for approaching that problem or how folks can get around that or work through that?

Kirk:
Yeah. The accredited investor thing is … it's a sore spot for me, because I think it's obnoxious to say people with certain amount of money are the only ones that can invest in this certain type of investment. That is actually lightened up a lot in the last 10 years. It's getting better. It's still an issue, but it's getting better. It's obviously there to protect investors, but it's in some ways it's also there to protect the high net worth people from competing with everybody else. If you're investing in real estate, and you're investing in real estate fund, and that fund requires you to be accredited investor, who's to say you couldn't just buy the property yourself? There's nothing to say that you have to be accredited to buy a piece of real estate. It's really more of the structured side and the security side that limit you.
For us, we invest in alternatives all the time. This almost never comes into the picture for us, the accredited investor thing. Obviously, we have to make sure that it’s suitable for the client. But if you’re an expert in horses, who’s going to come here and say, “You shouldn’t be investing in horses, because you’re not accredited?” That’s the most ridiculous thing I’ve ever heard. That’s not how they really look at things when the regulators, when they look at it, you really have to just … if you’re relying on other people or funds, then you can get caught up in that. But if you’re investing directly, very infrequently, will that actually even come into play?

Scott:
Got it. What about some of these investments? I think people call investments but don’t really know what they’re doing and are more just speculating groundlessly. Now, let’s art work, for example, artwork, art … there’s a few people I know who invest in art and make money in it. But I think many people buy art, maybe not knowing what they’re doing and thinking that it’s an investment. Do you have some of the traps that you think people fall into, another good one is diamonds or diamond rings. One of my buddies, I think, is going to buy a diamond ring. It’s a great deal. It’s going to be a good investment. It’s like, dude, it’s a capital gain that you’ll never realize. It’s not really an investment, hopefully.

Mindy:
Zero people buy used diamond rings.

Scott:
Yeah.

Kirk:
Here’s another one, Scott. Have you ever met anyone who didn’t get a good deal on a diamond ring?

Scott:
I have not met anyone. I don’t know. I think I’ll be out there. I bought a diamond ring. It was a synthetic diamond. I got it because there’s all bunch of reasons for that at lower price, really good quality. No one’s dying to mine the diamond, all that good stuff. I know that its value dropped right after I bought it. I think, I’ll be that guy who didn’t get a great deal on a diamond ring. But I got it a great fiance. Whom I’m going to marry later this year.

Kirk:
Congratulations.

Scott:
It’s all it matters. Anyways, yes. I get your point, though. Sorry for throwing you off there.

Kirk:
No. It’s interesting, because I remember reading about diamonds maybe 10, 12 years ago. There was a great article. I forget where it was. But it was one of the magazines. But it was this long article about how diamonds actually work, how the monopoly works, how they restrict pricing, the different types of diamonds. It was really thorough. I read it and I came away with, all right, so diamonds, any diamond you buy is worthless if unless you’re mining them, because they’re effectively creating a market which shouldn’t exist, except for the fact that they have a monopoly that is sustained, because they’re all colluding, effectively. It’s not really a monopoly, but more or less is.
I could very easily go and mine a bunch of diamonds and come out and just start selling them at a big discount. There’s just this monopoly that exists. That’s the reason why they’re high priced. I get it. It’s probably shouldn’t be allowed, but it is. I think you just need to understand what the “value” is. This is actually something I’ll bring it up because this is something that people rarely think about. When we look to buy an investment, we go in with the exit in mind. We know why we’re buying it. We know when we’re going to sell it, and why.
If you buy Tesla, and it’s $100, and your exit is 200, and it goes to 250, you probably should sell it. You’ve waited too long. You need to adhere to your strategy. There’s nothing wrong with taking more profits. But what a lot of people do is they come out, they buy a stock, it goes up whatever 100% and it hits their target. They just say, “You know what? I think it’s going to keep going higher.” Well, let me spoil it for you. You can’t predict the future. No one can. You have no idea what it’s going to do.
The bottom could drop out tomorrow. I actually had a client who worked at Uber. He wanted a certain price for the stock. I said, “Hit that price,” right after went public. I said, “You need to sell it,” because I got to know, I think it’s going to higher. I said, “Sell the stock.” We talked about this, a long conversation. We agreed this is a good price. At the moment, he said, “I don’t want to sell it.” He held on. He said, “I got to run. Let’s talk about it tomorrow.” The stock dropped 10% the next day.
We talked and I said, “That’s what you missed, you missed your opportunity.” Now fortunately, it came back, and it came back again. We had the same conversation. Oh, I think I should like … I’m just “sell the stock.” Fortunately he did. Then we had COVID hit, and then the stock dropped like a stone. The point being is you don’t know the future. You have to put together a plan, and you have to stick with it. You can’t go back and say, “Oh, I lost out on money I could have made.”
Yeah, I know. I could have gone to the casino. I could have hit Snake Eyes and made tons of money. But I didn’t do that. If I didn’t bet on this, oh, this would have happened. You can’t go back in history and say, “What I should have could have.” You just need to have a plan and stick with it. I think I saw Mindy celebrating when I said you need to have an exit strategy in mind. That’s really important. That’s what we do any investment we have, there’s an exit strategy. If you don’t know, then you shouldn’t be investing.

Scott:
I mean, I’ll use some time selfishly here for me. My exit strategy, when I invest is I leave my money in that investment or I intend to leave in that investment, basically, in perpetuity. For example, I invest in the stock market index fund, and I never have an exit. I plan to build wealth 30, 50 years plus until I potentially begin to modify my portfolio to begin withdrawing on it.

Mindy:
But that’s the plan.

Scott:
Yeah. It's an indefinite investment horizon. The requirements with that philosophy, for me, are sustained cash flow, or at least cash generation that does not require me to put more capital into my investments on a regular basis to sustain them. The maximum possible long-term appreciation of that asset over a long period of timet. Because of that philosophy, I invest in stock market index funds, because I want to touch them, and they're completely passive, and I think I'm going to get a reasonable shot at least average long-term returns, and then real estate, where I leverage appropriately, capitalize appropriately so that I don't believe I'll ever have to commit incremental capital into my investments, and they can self-generate, and then I just re-leverage or sustain my rate of long-term. If you share my philosophy, or if that philosophy is shared by anybody listening, what are some asset classes in this list of alternative investments that might satisfy those requirements for indefinite long-term returns, no continued capital commitments?

Kirk:
Yeah. Actually, let me go a little bit off the reservation air and answer this a little bit differently, because I think this is a great point that a lot of people miss. Having that plan, even if it’s perpetuity, I mean, you look at trust funds, or endowments, like college endowments, those have perpetuity as their timeline. But even with that, there has to be some parameters of what if this happened, would you still sell? Let’s say you’re investing in gold. Gold just goes up to 10,000 tomorrow.
Well, you have to reassess and say, “Is that too expensive?” Maybe it is. I would say it’s too expensive. I would say the price I would look at for gold would be much lower. If things get too overinflated like in 1999, you might have said, “You know what? I think things are a little bit crazy. Maybe I should reconsider what I’m doing.” Because part of this is actually is … and this is something that I do a lot with investing is I wake up and I look at my investments, say, “Would I buy this today?” If the answer’s “no,” then I sell it.
I do that as a process because it helps me rethink my positioning all the time. Now, I don’t do this every day. But this is one of those at least quarterly, I look at things and I say, “Why is that in there? Is that’s in there because it’s just been there and it’s not doing anything?” I reassess the position, because I think what happens a lot of people is they do something and they forget why they did it. Then they’re too lazy to actually fix it. What that can happen is, and it’s like dating somebody. You get comfortable with it. It’s, “Hey, I’m dating this person. I’m a little too lazy to dump them. But it’s not terrible, but it’s not great. I’m just going to stick it out.” That’s not really a secret to success. You need to reassess and make a good decision with where you are. I want to start with that because I think that’s really important.
I also want to point out because you made a subtle point, which I think is really important. You mentioned you're indexing and you're more perpetuity or very, very long term time horizon. That's great. One of the things that's really important is you need to understand what your strategy is, and what the instructions are. This is where a lot of people get into trouble. If you're an indexer, you're a buy and hold indexer, modern portfolio theory, all the things that they teach you about in school and pretty much everywhere. Then you need to understand the rulebook. The rulebook is you buy and hold through thick and thin. You just have to do that. The market goes down 50%, buy and hold, because you cannot predict the future. That is really important to understand. When the market goes down a lot people say, "Oh, I got to get out. This is too painful." If you know what the instruction manual says, and you're going with a strategy, you need to stick with that strategy. Yes. Yes, Mindy.

Mindy:
Yes. Yes. Yes.

Kirk:
You cannot change midstream. Just because that something happened that you didn’t like, you need to know going in, “Hey, this could happen. This asset could drop 50%? If it does, what am I going to do? Am I going to stick it out?” If you can’t stick it out, then you might want to reconsider what you’re doing. Now, the way I look at it is, from my perspective, any investing is risk management first. That’s what we do for everything, risk management first. Can we manage the risk on this? For the stock market, we don’t look at a buy and hold forever approach. Because I think that if you’re driving down the road, and you see a boulder in the road, you don’t just hit it, fly from the car, get back into your car and keep driving, you drive around the boulder.
Our strategy is a little bit more tactical, and we look at things. It’s not day trading, but we’re looking at managing risk. We understand that we’re not going to outperform the index in any given year. But we know that we’re not going to lose 30%, 50% when the market goes down. Our strategy is very different. I understand where it’s strong, and where it’s weak, and I have to abide by the rules that I’ve set out. If I do, then it works out well. If I start deciding to go off script for what we’re doing, that’s where I can get myself into trouble. This applies to any investment, whether it’s stocks or real estate. You have to understand the instruction manual, and you have to follow it. Because, for me, to do a buy and hold would totally derail what we’re trying to do. It’s really important point to understand that if you don’t understand the instruction manual, you’re probably going to fail at it.

Mindy:
Okay. I want to answer this based on what I know about Scott. I’m looking at this list of all these alternative investments. Scott, you know that I’m the president of your fan club, but you should never ever, ever, ever buy artwork as an investment. That doesn’t make you a bad person. But that makes you really bad …

Scott:
I have great taste.

Mindy:
No, you don’t. You have great taste in fiances. You’re very smart. But you cannot pick artwork. But on the other hand, what did you major in college. business and economics and finance in like 15 majors?

Scott:
Yeah. Economic and history, corporate strategy, finance.

Mindy:
Okay. Number 51, private equity. Number 52, venture capital. What is private placement? I don't know what that is. Start at angel investing, those kinds of things play to your strengths, because you can look at their business plan and read it and it makes sense to you. Or it doesn't make sense to you, and you're like, never mind, I'm not going to invest in this. But those play to your strengths. Whereas artwork, maybe not so much. Wine, I don't know. Do drink wine?

Scott:
Yeah.

Mindy:
Do you know anything about it?

Scott:
I’m as bad as happy at the end of a $10 bottle as at the end of a $50 bottle of wine.

Mindy:
Exactly.

Kirk:
I don’t know if wine is a good one for me.

Mindy:
I think we’re all that investing in wine. But there are things on here that play to your strengths, just like the structured settlements play to the attorney who loves contract law has strengths. I think that there are a lot of ways to invest. Now that isn’t a long-term, necessarily, the venture capital, do you have any statistics, Kirk, on how many times you have to invest in a startup before you hit a good one. There’s people that give money to everybody, and then they hit one, and it’s such a big payout that it makes all the other dumb ones worthwhile. But …

Kirk:
Yeah. I don’t have the exact statistics, but I can generally tell you what they are. Successful venture capitalists, I’m not talking about the three of us who don’t do that for a living. I’m talking about people who do it for a living or good at it. Generally, the metrics are, you’re going to have about three to four that are zeros. They’re just going to go to zero. They’ll be bankrupt. You have one to two grand slam home runs. If you have one, that’s sufficient. But one to two grand slam home runs, you probably got another three or so that are neutral, meaning they’re not going to go anywhere. Then you get a few singles and doubles.
I actually just interviewed a guy last week on this, so it’s a little bit top of mine. But it’s really a great asset class, if you enjoy helping come … because part of this is like angel investing, part of this is actually the giving back part. If you’re a successful entrepreneur, and you can help a startup company, you can make money, but you can also live vicariously through them. That’s why a lot of them do that. The venture capital companies or vulture capitalists, some people call them, a lot of them invest in technology, because there’s a huge amount of potential for 10X, 100X, 1,000X return on their investment. For them, they can have a bunch of zeros and one grand slam home run is going to make them on average, 20% to 30% a year. A lot of them are looking for that 20% to 30% as their outcome based on the statistics of what’s going to be a success and a failure.
But what’s important to take away from this is they’re going in assuming there’s going to be failures. They know it. They can’t predict all of the best outcomes. I mean, unless you’re like Peter Thiel, and all the best people come to you and you’re just cherry picking the best ideas, but even he makes mistakes. You don’t know the future. All you can really do is do your best and play the odds. If you look at distressed debt, it’s another one, or day trading. Day trading is a perfect example. If you’re a day trader, it’s all about statistics. If you look at … I’ll give you an example. Let’s say you’re a day trader, and I tell you that I have a 40% success rate. Do you think I’m making money or losing money?

Scott:
Depends on how big you bet on the winners and how much you lose on the losers?

Kirk:
Partially correct. Yeah, there’s another part of it, though.

Scott:
What’s the another part?

Kirk:
The other part is it’s how much you make when you’re winning, and how much you lose when you’re losing. For instance, let’s say you had a 10% success rate, or 20% success rate, let’s say for example. Twenty percent of the time you’re right. But when you’re wrong, you lose 5%. When you’re right, you make 100%. You’re going to make money. You’re going to be successful. I’m doing the math in my head. I might be wrong. But you get the gist of it. It’s not necessarily about how many are winners and how many are losers. It’s how much you make when you win. It’s how much you lose when you’re wrong. That’s a really important consideration. Because there’s some people were 90% success rate. But their upside is so small that they’re really not making a ton of money. They’re grinding it out for a living. I think it’s important to understand in numbers, there’s not just winners and losers.

Scott:
It sounds like if you’re a poker player, that’s a good one for you, because you’re understanding the odds of the pot size and how big your bet is, your pot odds is, all those different types of things. It’s similar type of analysis to day trading in some ways.

Kirk:
Yeah. Probabilities bets. Yeah, I think that’s a perfect comparison.

Scott:
Look, I guess what we’re trying to communicate overall to people listening is there’s a wide, wide variety of potential investments out there, that depends on your skill set, risk tolerance, interests, not the way your brain works and those types of things. We can’t possibly cover every strategy that works for every investor. I do think it might be helpful to just give everybody my framework and how I’m thinking through this list, and walking through that, for me.
We already talked about my long-term approach to those types of things and my skill set. My skill set is in real estate investing and operating small businesses in the private equity space or smaller. Items that work for me would be small businesses that you could buy and sell with SBA loans, venture capital, private equity, or angel investing will be things that I’m sure I will become interested in future years, in either investing in the funds or individual companies in some capacity alongside those books.
Again, we talked about the small business model and the massive amount of inefficiency and the number of small businesses being sold by boomers, recently. I think there’s a lot of inefficiency in that market that a hustler could go and figure out how to realize and a lot of non-financial things that come into play, like a business owner who’s selling a company, and maybe has a few key employees that they want to retain, who are family to them. They’re not going to be as concerned about price. They’re going to be more concerned about keeping their legacy going, the name on the business, those types of things, those types of areas.
Those are some of the ways that I think about it. Those all fit in my framework of, I’m willing to invest forever in those assets, never want to commit more capital or be forced to commit more capital in those assets, but will sell whenever the appropriate time comes for those investments to realize their gains or whatever. Anyways, I know I’m being selfish and hogging some of my philosophy. But I feel like that’s maybe helpful for some, and thinking through how I would make … condense this list of 75 different things into ones that might appeal to me, based on my background.

Kirk:
It's not just the assets to. I mean, you're making some great points. It's not just the assets as well. It's also the way you invest in them. Let's say, for an example, let's say angel investing, you could find a company and give them money for equity. You can loan them money for debt. You could put money into a fund, and invest in a bunch of companies. You could do … There's a thing. I'm not sure if I have it on this list called the Search Fund, which is an interesting concept, which is not really talked about much. But it's basically there's an attorney in Boston.
What he does is he goes and finds businesses. Businesses that potentially want to sell, he’ll acquire the business, and he’ll put in some recent Harvard MBA grad or whatever, running the company. He’ll buy it for good price, and then he’ll put that person in, and he’ll make good cash flow. It’s not a huge space. But it’s something that I find interesting, because you’re able to buy a cash flowing business. You don’t want to do it yourself. I mean, if I want to buy a dry cleaning business, I don’t want to do that. They’re great businesses from what I hear. But that’s not what I want to do.
You got to find somebody to run it, and you have to incentivize them. I mean, I have a client who buys car washes, buys a bunch of car washes, huge cash flowing businesses, great business. I don’t know that I want to do that. But he does it. He does it well, makes great money. I would probably say, “Hey, I’ve got a bunch of money, I want to buy a carwash, can you help me?” It’s just finding creative ways to get into the space. It doesn’t have to be, you’re doing it all.
You could find other ways to do it, too. I think it's really important to not only understand the opportunity, but how you're going to do it and how you're going to manage the risk. Because I love real estate. I don't want to be a landlord. I need to find another way to manage the risk of the property management. I would have to either find somebody, invest in a fund, invest in a read, or whatever it might be, but I would find an alternative approach to do that. You have to look at things multiple different ways.

Scott:
Do you have any clients, or do you find any stories of people who are relatively successful at this within a year or two, starting with no more than maybe $50 to $100,000 in net worth? Or is this really a game that you should be considering after you’re rounding out 500,000 in an investable net worth or a million? Is there any general framework you’d have or the entry point or where leveraging your time is defective relative to not dollars you have to invest for those types of things?

Kirk:
I think it depends on the investment. I mean, if you’re thinking about investing in a company, and you have $5,000, then you might need to find other investors, that might not be enough. The amount of money is really important in terms of what your possibilities are. I mean, if you’re investing in tax liens, you could do that very easily buying a bunch of hundred dollar tax liens. Low risk, low entry point. But if you’re buying real estate in Massachusetts, let’s say, it’s going to be really hard to invest with $10,000. Property prices are really expensive here. The amount that you’re getting in is a really important part of that. That’s why you need to understand what the other alternatives are to invest in that asset if it doesn’t meet your criteria.
But I will say that if you’re looking to get started in this, it’s really important to have, and I’m sure you guys talk about this on the show all the time but if you’re investing in real estate, you need to have an emergency fund for that property. You need to have money saved up. You can’t just put 100% of your money into the property and assume “Oh, great, I own this property.” Then you need a new roof. Now what do I do? It’s not really much different from investing in private company stock. You invest in the stock, and then you need the cash tomorrow to buy a new car. Well, you can. You invest in that company, you can’t sell. That is tied up. That is illiquid assets. You can’t do a darn thing with it. You don’t run the company, someone else does. You’re stuck. You need to understand going in that, “Hey, this is money. I’m pretty much going to light on fire.” I mean, that’s how I look at it with any investment.

Scott:
Well, it sounds you get a lot of experience around this. We ask this question of a lot of investors who come on our podcast. But what would you say the cash on hand of these investors is in terms of cash they reserved for lifestyle expenses, a year of spending, two year, whatever it is, how would you say the visitor framework that you see consistently applied across your client base in terms of how much liquidity or access to cash they have if they’re investing in more of the illiquid assets in this list?

Mindy:
The illiquid assets tend to be the higher net worth people, just because of the illiquidity, because if you have 10,000 in savings, and you put it all into some illiquid asset, and then you need it, you’re in trouble, whereas high net worth investors, like an extra million, they don’t need to liquidate $5 million tomorrow for no apparent reason. There’s a lot more well thought out planning done with higher net worth people, because they know that in no scenario would they ever need $2 million if they’re worth $5 million. There’s just no scenario that it’s going to be such an emergency, they need to liquidate that. They can afford in that scenario to put into illiquid assets.
Now, I’m not saying everybody should look at it that way. Because if you don’t have $5 million, let’s say you only have $100,000 as your net worth, and you wanted to start buying real estate, there’s nothing wrong with that. You just need to understand what your potential needs would be. This is a good question, but it’s really hard to answer. I have clients who have one month worth of emergency fund, which I think is way too low. I have clients who have 12 months. I think three to six months is probably a lot more normal to have in terms of an emergency fund. But a lot of this is also depends on your cash flow. Are you getting a pension or social security? That’s more or less guaranteed income. I said guaranteed in air quotes, because who the heck knows what’s going to happen with social security. But let’s just say for the moment, you’re relying on social security. You’re more or less guaranteed to get paid that, okay.
Now, if you have a job at a company where you’re an employee, you could get laid off tomorrow. You don’t have a lot of security with that income. If you run your own business, you might have a pretty strong … let’s say real estate, you might have a pretty strong cash flow. But who ever thought COVID would have happened. Now you got a bunch of tenants you can evict and they’re not paying rent, and now you’re in trouble. You need to really find a comfort zone for you that you can look at a … I call it thinking about the worst case scenario.
What’s the worst thing that could happen? If you’re comfortable with the worst thing that could happen happening, then I think you’re pretty in good shape. It doesn’t mean you have to be that conservative, because there’s a lot of people who, I know, oil and gas investors, or a lot of real estate developers, they leveraged themselves up to the hilt. Then a bad economy happens, they go bankrupt, and then they do it all over again. It’s a very common theme. They make tons of money when things are good. They never know when to shut it off. They never know when to stop.
You're kind of protected by good trends. But as soon as bad times hit that's where people get into trouble. If you want to be really smart about it in managing your risk, you really need to think about what's the worst thing that could happen? What if half my properties start paying me rent? Am I okay for six months? What would I do? Thinking through those scenarios, maybe you need to get a home equity line that you never tapped just in case. Maybe you need to save up more money. I mean, Mindy was on our show recently. We talked about this, having that emergency fund, having … what did you say six months or 18? It was a big amount.

Mindy:
I said six months at the minimum simply because COVID is our … I hate this phrase … our new normal. But it’s our new normal. If I have a tenant who can’t pay rent, I have to pay that rent. I have to pay the utilities or shut them off. I have to do all the things. Until I get somebody in with a eviction moratorium, that could be a really long time. What’s the eviction moratorium now? I think it’s till the end of the year. This is being recorded in the middle of September in 2020. I think the moratorium goes through the end of December. Is it going to go farther? It might. I mean, what do you do? It’s such an unprecedented thing. You can’t just kick everybody out. You have to make sure you can cover your interest in that property and six months is the minimum that I would suggest you have.

Kirk:
Yeah. I think we’ve all experienced the COVID thing, which has been an extreme end of what could happen and the worst case. You don’t even live in Massachusetts, Mindy. Massachusetts, that’s six months is the minimum it takes to evict somebody if you know what you’re doing. The state is very tenant friendly and try to evict somebody in when it’s cold out. The courts are going to say, “Ah, we’ll wait to the spring and we’ll review it then.” It is not the best date for that. That’s also a part of it. But I go to Rhode Island and they’ll kick to the curb and 30 days put all your stuff in the curb and they don’t care.
I think there’s a lot of considerations that you have to understand when you’re investing is what is the worst that could happen? I don’t know. Maybe a tornado goes through … I mean, now that all this is happening, I hear all these risks that are going on, the California, Cascadia Subduction Zone and all the terrible things that would happen with that. You can’t think about it that way. Because, I mean, the worst case, rarely would happen. But you have to at least be comfortable with a bad scenario. That’s how I look at it. You can’t mitigate all of the risks. There’s no way you could do it. There’s always going to be risk there.
But if you’re comfortable with what the risks are, that’s really the comfort level. I agree with Mindy. I would say, if I’m a real estate investor, six months, at least minimum, I think is safe. Then I know people want to stretch their buck, and they want to leverage up and buy more real estate. But all that leveraging or pyramiding, depending on how you want to do it, that only works as long as things keep going up. But as soon as they don’t, things go crashing down if you’re not protecting yourself.

Mindy:
Yeah. A moment ago, you said some of these are illiquid investments, which ones, what are ways to know that an investment is going to be illiquid? Then how can you get out of this? I would think that artwork could be fairly illiquid. When I think artwork, I think like Monet’s and Gauguin, I don’t think Bob’s painting down the street. But …

Kirk:
Bob’s up and coming, Mindy.

Mindy:
Okay. Maybe I should connect with Bob. I’ll listen to you. But if God tells me Bob’s up and coming, I’m going to skip that investment. But let’s say you fall on hard times, how do you get out of an illiquid investment?

Kirk:
Yeah. That’s a good question. Let’s say, now, every one of these is different. But let’s take something that the listeners going to understand. Let’s talk about non-trade REITs. The traded reads, they’re liquid, you can go on the stock mark, you can buy and sell them every day. Non-trade REITs are this another read, which are very broker dealer friendly, which is why I don’t like them. They’re basically illiquid. You might as well just own the real estate yourself. But let’s look back in 2008. A lot of these non-traded REITs have quarterly or monthly liquidity. If you needed cash out, you just say, “Hey, I want the cash out.” At the end of the month, or 60 days, or whatever it is per investment, they give you cash. Now, they always stipulate that if too many people want their cash, you might have to wait an extra month or two, because they’re not going to liquidate it all at once.
2008 happened, everybody wanted their cash back. These properties went from $100 a share to $20 a share, and everyone wanted their cash out. Not only did they want their cash out, they’re willing to take a discount just to get their cash. They didn’t care. They didn’t care what it was worth. They just wanted money back. These firms wouldn’t do it. Because they said, “We can’t. We’re freezing it. We’re not giving any redemptions. We don’t know what the price is. We’re not redeeming anything.” That’s obviously a problem. Now, there are secondary markets for a lot of these. In that case, for non-trade REITs, there was a secondary market, I found out way later. Wish I found about it sooner, it was a great opportunity. But they created this marketplace where they would take people who wanted to cash out. They would give them a price, which was not a great price. But it was something.
Had I known I would have been in there buying these things hand over fist because I knew of a bunch of them that were really solid. They probably were a discount, but they weren’t 50%. They might have been a 20% discount. But people didn’t care. They’re willing to sell it for 30 cents and a dollar. I would have just gone in and bought that up like it was my job. That’s the thing that you need to understand is there’s always secondary markets. But a thing like the stock market has high liquidity because there’s millions and millions and buyers of sellers, and at any given moment for us, a big company, you will get a very reasonable price.
But if you’re selling real estate, and there’s no buyers, you’re going to get a really crappy price. I think it overlays the same in every single market. There’s all of these investments. You have to find a buyer and a seller. It’s supply and demand. You look at wine and nobody’s buying it, then it’s worth nothing. It’s only worth what somebody’s willing to pay for. Artwork is the same thing. I guess there was a podcast, Michael Lewis’ podcast, Against the Rules, which they talked about the art market and how it’s so artificial, and people just throw numbers on it, and it’s somehow going to make sense to people. It’s not really the true value. They just artificially put these prices up there and people pay it. It’s a scam in some ways, but it isn’t an actual market, people buy and sell it. I think it’s just understanding that there’s probably a secondary market for any of these. I can’t see anything on this list where they’re I don’t know of a secondary market. I believe they’re always out there. You just need to explore and find them.

Mindy:
Well, what I’m hearing you say is that, if you are considering investing in these, with the long haul in mind, don’t just try and jump in and out of these alternative investments, and just make that part of your plan. There’s not always an easy button for everything. I think it’s important to note that this is not something that you’ll just be able to jump in and out of. I’m not going to buy horses ever. I know somebody who buys horses all the time. Why I guess all the time isn’t the best way to say that. Yeah.

Kirk:
I think real estate is a great overlay for all this conversation, even though we’re trying to talk about alternatives. If you’re buying real estate, it’s illiquid. If you have to sell, you’re going to get a crappy price. If you have to buy, you’re going to get a crappy price. If you’re patient, in around here in Massachusetts, and most places in the country, it is a seller’s market. Around here, stuff doesn’t sit on the market for more than a week, if it’s priced remotely, accurately. If a week, maybe a day, I mean, it just doesn’t sit in the market. It is completely a seller’s market.
If you want to sell, it’s a great time to sell. If you have to buy, you might get stuck with a crappy price, which quite frankly, it’s one of the reasons why we’re being patient. We want to buy but we’re just waiting because I don’t want to buy in this market. I think it just going to get … I’ll end up being one of these people who get the worst price. I’ll top ticket right before the musical chairs stop. You end up getting stuck with a really expensive property. I think as long as you have patience, and you’re, you’re willing to wait, then you’ll get good prices. But that’s the positive and the negatives of an illiquid market. If you’re patient, you can do really well in it. If you’re really in a rush, you could really get hosed.

Scott:
Awesome. Well, do you have anything else that you’d like to add here before we wrap up about this world of alternative investments?

Kirk:
No. I mean, I think we did a great job of covering a lot of it. I think it's a lot of this is just investing in what you know, and not getting caught up in the song and dance of somebody else, or some newsletter that you read. I mean, I get a ton of people come to us and say, "Hey, should we buy gold? I hear the government's going to default on their debt, or we're going to have super high inflation. What can I do?"

Scott:
No. I think we’re right around time.

Mindy:
Kirk, this has been so helpful. I have learned so much from you today just with regards to how to think about alternative investments. I do like alternative investments. I think this is going to be a lot of fun to start diving into. Where can people find this big list of alternative investments that you sent me?

Kirk:
Yeah. I’ll give you a link to put on the website. You can also go to www.innovativewealth.com/biggerpockets. That will be a link to the big list of alternatives.

Mindy:
Awesome. We will include a link to that in our show notes, which can be found at BiggerPockets.com/moneyshow144. Again, Kirk, thank you so much. This was hugely helpful and I really think that we’re going to start getting a lot of people sending us messages. Where can they send you a message? Where can they find out more about you?

Kirk:
Yeah. I’m pretty easy to find. You can go to innovativewealth.com. You can contact me through that site. I also host the show Money Tree Investing podcast. You can find me there. Also through all the social media mediums, I’m really hard to miss. But yeah, just feel free to reach out. I’m happy to chat.

Mindy:
Awesome. Thanks, Kirk. This was great. Thank you so much for your time today. We’ll talk to you soon. Scott, that was Kirk Chisholm. What did you think?

Scott:
I learned a ton from his approach to investing there. I think it was really helpful. I already was interested in exploring some of these things around angel investing, venture capital, private equity, small businesses, those types of things. But I loved the framework that he provided and insight into other options there and just encourage everyone to go and check out this list in the show notes.

Mindy:
Yes. That is going to be great. The show notes which can be found at biggerpockets.com/money show 144. I would like to ask a favor review. If you enjoyed our show, please leave a rating and review wherever you listen to your podcasts. Ratings and reviews help other podcast listeners find our show. Scott, should we get out of here?

Scott:
Let’s do it.

Mindy:
From episode 144 of the BiggerPockets money podcast. He is Scott Trench, and I am Mindy Jensen saying ciao, ciao, brown cow.

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The BiggerPockets Money Podcast is for anyone who has money… or want to have more! Join BiggerPockets Community Manager and Podcast Director Mindy Jensen and CEO Scott Trench weekly for the BiggerP...
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    Chris Payne
    Replied 2 months ago
    I just found this FI movement at age 33, and got hooked listening to podcasts's daily. With a little money to get started somewhere, after listening to this episode it kind of took me back to my first prospective of investing which seems scary. I was super intrigued after the 30+ podcast's I've listened to the past few weeks until I got to this episode.