Why You Should Invest in Main Street, Not Wall Street
Ninety-nine times out of 100, an investor’s top priority is maximizing investment returns while minimizing investment risks and portfolio volatility. Unfortunately, most investors attempt to do so by gambling in the "Wall Street Casino," a landscape of volatile paper investments that are soulless and uninspiring. In other words, a loser’s game. The much safer bet is pursuing investments in tangible commercial real estate assets as an investor in Main Street, a term that collectively denotes small businesses and small-town values—the polar opposite of Wall Street. Through these investments, investors have direct ownership of income-producing assets that enhance lives, solve real world problems, and provide tangible societal benefits.
Commercial real estate can be for anyone, whether it’s a Minor League venture or going fully pro. However, many end up playing the wrong game by only opting for traditional or volatile investment plans. Here are a few ways someone might be dropping the ball on building long-term, sustainable wealth.
1. They spend a lifetime building a nest egg of paper assets that hopefully lasts through the end of retirement.
The majority of investors try to build long-term wealth using a traditional retirement plan. This nest egg consists mainly or entirely of traditional paper investments such as stocks, mutual funds, bonds, and ETFs. Under the traditional retirement route, people earn money, save money, invest, and grow their investment portfolio until it reaches their financial independence number (typically 25 times a retiree's annual income needs). Upon reaching this number, people can choose to retire and live off their nest egg by selling paper assets to generate income—but with a big caveat. If they liquidate too quickly, they risk outliving their savings.
With their periodic crashes of over 50%, those who invest in stock markets will inevitably experience a wild roller-coaster ride. Because of these events, people may be forced to delay retirement, as it could take years for the value of their portfolio to recover to pre-crash levels.
This is the main reason why investors should not sleep on syndicated commercial real estate, an asset class that has historically generated higher returns with reduced volatility as compared to stocks. When investors understand these benefits, they often adjust their investment thesis and invest in private commercial real estate, which is a more favorable investment on a risk-adjusted basis than both stocks and bonds. Additionally, they are owners of assets that generate consistent income; they are not liquidating their assets to generate income. With this alternative retirement plan, people can create a financially robust portfolio of income-producing real estate assets.
2. Forever caught in the rat race, demanding work obligations consume the majority of their time as they fall further from the life they desire to live.
Most people work as W-2 employees, trading their time for a paycheck as their main or only source of income. Time is a non-renewable resource, and there are only so many hours in a day. When wealth is contingent on time, and people are limited to how much they can actually work, it is extremely difficult to get ahead or prioritize doing things they enjoy. This cycle is broken when people modify their investment strategy to generate passive income from cash-flowing commercial real estate. Beyond the financial security that comes with multiple income streams, they have the freedom of free time.
This is profound on a personal level, but it can also create change on a much greater scale. For instance, say that after Michael changed his mindset and investment thesis, he started to generate more income, freed up time to spend with his family, and finally pursued his personal mission to help bring clean water and basic sanitation to millions of people worldwide. Michael's success then inspired others to adjust their investment thesis, and they embarked on their own journeys to positively impact the world—something only made possible by their decision to investment in commercial real estate.
3. They are disconnected from their investments, and they feel helpless as to how their capital is used by corporate leaders and fund managers.
People underestimate the power of their wallets to effect meaningful change. Increasing numbers of high-net-worth investors and retail investors want their capital in investments that both deliver returns and improve the world around them. Too often, people believe that they cannot have a meaningful impact and are too overwhelmed to get involved and positively affect the world around them. As a result, they fail to consider that their investments can be a means of enriching lives and improving communities.
When people modify their investment strategy and objectives to invest in commercial real estate assets such as multifamily, senior living and mobile home parks, the affect on lives and communities is remarkable. For instance, say Amanda changed her investment objectives and now invests primarily in assets that provide safe, clean and functioning housing. The demand for these assets is evergreen and investing in them has a direct benefit to communities. When others adopt Amanda's investment strategy and objectives, then the results become self-evident, even more people will become empowered through commercial real estate investing to improve Main Streets around the world.
For more information on commercial real estate and passive investing in multifamily assets, please check out our eBook - More Doors, More Profits - by clicking here.