Selecting how and when to invest is always a challenge, and in 2024 investors face an often-confusing array of investment choices that present both opportunities and potential pitfalls.
Those in search of safer, more conservative investments often turn to large cap stocks as their first stop. Given that the stock market is near or at an all-time high, it’s understandable that many investors would turn to stocks for reliable returns. However, while there may be some disagreement among financial advisers as to where to find the highest return on investment, most would agree on the critical importance of having a diversified portfolio. The agreed upon belief that it’s best not to “put all your eggs in one basket” certainly holds true in the field of investment.
With that in mind, here are some investment options worth considering in 2024:
Real estate investments: Not all choices are created equal
There’s an old saying in the world of real estate: “Buy land, because God isn’t making any more product.”
John Blackmon
While no one can disagree with that premise, it’s also critically important for investors to select real estate investment opportunities where the risk and (potential) rewards are in line with their unique financial situation.
After consulting with professionals who understand the often-complex nuances of the real estate markets, investors will find themselves presented with multiple choices, ranging from residential, including multifamily, investments to office properties.
Buying and leasing out a rental property—either for short-term or long-term rental—is an often-popular vehicle for investors. The benefits of this type of ownership investment include the many deductions available, ranging from property repairs and maintenance to mortgage interest and depreciation.
Another investment option is private real estate lending. In this type of investment, an individual or a group of investors pool their funds and make a loan to a developer. Known as “trust deed investments,” they are often popular in the financial world as they don’t require the investor to own or manage any property. In addition, the investors directly recoup their funds, including both the principal and interest.
Considered to be a real estate transaction agreement, the deed of trust allows a third party to hold onto the property until the borrower repays the full amount to the lender. Typically, a title company or real estate broker will serve as the third party in a trust deed investment.
To avoid any potential diversion of funds from their specific purpose, many financial firms—including my firm, NV Capital—ensure that clients’ trust deed funds go through a title and escrow company once the loan has been made. Third-party servicing companies then collect the monthly payments on behalf of the private lenders.
To help mitigate risk, the rule of thumb in trust deed investment is to ensure that no more than half of all your investment funds are placed into trust deed loans.
Diversity: An essential element for every investment portfolio
The stock market: Times may change, but for many the stock market continues to be the first stop for investing funds. The popularity of stocks, combined with overall consumer confidence, have helped raise the Dow Jones Index to its current record-breaking heights.
However, one of the most resonant lessons from the Great Recession of 2008-09 is that there is inherent risk in investing in even the safest of stocks. It’s also why it’s vital that smart investors do not rely upon stocks as their sole source of investment.
When selecting stocks as their investment vehicle, it’s also important to place funds in a diversified stock holding. Small cap, blue chip, and foreign stocks each present financial opportunities depending upon the investor’s respective comfort level.Regardless of the final selection, a diversified stock portfolio is essential.
Even federal officials responsible for oversight of the investment industry point out the importance of ensuring that investors maintain a diversified portfolio. The Financial Industry Regulatory Authority (FINRA) states that by holding a diversified investment portfolio, the goal should always be “to manage your risk by spreading out your investments … both within, and among different asset classes.”
Beyond the stock market: Other investment options exist
Depending on individual investment goals and risk aversion, other investment vehicles worthy of consideration include bonds, mutual funds and cash reserves.
For example, take the case of bonds: supported by a strong national economy, in 2023 the average bond fund in the high-yield bond Morningstar Categories gained 12.1%. While that level of return will vary each year, it exemplifies the potential financial rewards presented by the bond market.
As is true with all aspects of business, there can be no reward without a certain amount of risk; however, with the direction and assistance of financial professionals, smart investments made in 2024 can provide for financial security, both now and in years to come.
John Blackmon is manager and owner of NV Capital Corp., which specializes in private lending by aggregating clients’ investment dollars together to fund loans on Nevada real estate.
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This story appeared in Las Vegas Weekly.