A Professional Investor’s Portfolio: Real Estate, Stocks, Crypto—What Else?

by Stephen Twomey | Sep 5, 2023 | Accredited Investor, BAM Blog, Blog, Real Estate Investing | 0 comments

1. What Does a Modern Investment Portfolio Look Like?
2. Stocks
3. Bonds
4. Mutual Funds
5. Crypto
6. NFTs
7. Real Estate Investments
8. Too Busy for Real Estate Investing? Choose Multifamily Syndication
9. Best Real Estate Investment: Why Accredited Investors LOVE BAM Capital for Apartment Investing

A portfolio is a collection of financial investments including stocks, bonds, real estate investments, hedge funds, and commodities. In order to achieve your financial goals and successfully build wealth, you need to build an investment portfolio that contains a wide range of assets including commercial real estate, art, and private investments. [1]

While stocks and bonds are considered the building blocks of an investment portfolio, diversification is also very important when it comes to portfolio management. A professional investor knows how to assemble an investment portfolio based on their risk tolerance and objectives.

Here we will discuss some of the asset classes and investment strategies used by professional investors to diversify their portfolio.

What Does a Modern Investment Portfolio Look Like?

The concept of diversification is very important to modern investing, and yet it is also very simple. It just means investors should not put all of their eggs in one basket. Diversification is all about reducing risk by allocating investments along various financial categories, industries, and instruments. At the same time, it seeks to maximize investor returns by investing in different areas that would react differently to the same event. [1]

Although there are many ways investors can diversify their portfolio, it all depends on what your goals are as well as your appetite for risk.

A modern investment portfolio typically consists of a diversified mix of assets designed to achieve an investor’s financial goals while managing risk. Here are some common investment vehicles professional investors use to diversify their portfolios.

Stocks

Stocks are a type of security that gives stockholders a share of ownership in a company. Also known as “equities,” they have the potential for capital appreciation over time. Investors may choose to invest in individual stocks or exchange-traded funds (ETFs) that track broad market indices or specific sectors. [2]

The two main types of stocks are common stock and preferred stock. Common stock owners are able to vote at shareholder meetings and also receive dividends. On the other hand, preferred stockholders do not usually have voting rights. However, they receive divided payments before the common stockholders. Preferred stockholders are also prioritized over common stockholders if the company goes bankrupt.

Investors buy stocks not only for the capital appreciation but also for the dividend payments and the ability to vote shares and influence the company. [2]

In terms of long term investments, stocks offer investors the greatest potential for growth via capital appreciation. Generally speaking, investors who are able to stick with stocks over long periods of time tend to enjoy strong returns.

But because stock prices move up and down, there is no guarantee that the company whose stock you hold will grow and do well. You may lose money from this if the stocks go down. And because of this risk, you need to consider other investment strategies.

Bonds

Bonds are debt instruments issued by governments, municipalities, or corporations. They generally provide a fixed interest rate and are considered less risky than stocks. Bonds can provide a steady income stream and act as a stabilizing force in a portfolio.

When an investor buys a bond, they are lending money to the issuer. This means the issuer will pay the investor a specified rate of interest during the life of the bond. When it “matures” or after a set period of time, the issuer will also repay the principal, also known as the bond’s face value or par value. [3]

Investors love bonds because it gives them a predictable stream of income. Most bonds pay interest twice a year. Bonds also serve as a way to preserve capital while investing because bondholders can get back their entire capital if the bonds are held to maturity.

Bonds can serve as a balancing force for more volatile investments such as stocks. There are many types of bonds such as: corporate bonds, investment-grade bonds, high-yield bonds, municipal bonds, general obligation bonds, conduit bonds, and revenue bonds. [3]

Despite its benefits, bonds also have some risk. If it is sold before its maturity, the bond may be worth more or less than its face value due to interest rate changes.

Mutual Funds

Mutual funds involve a group of investors who pool their money together and invest that capital into different securities like stocks, bonds, and short-term securities. Mutual funds tend to have different investment objectives. These objectives drive the strategy and the choices of investments within the fund. [4]

Mutual funds have a professional fund manager who takes responsibility for the fund. Their goal is to help the investors generate income by protecting the portfolio’s value and investing in the right assets. Investors gravitate towards mutual funds because of its ability to hold many different securities, therefore naturally providing diversification. [4]

Mutual funds are easily accessible to individual investors, even those with limited capital. With relatively low minimum investment requirements, individuals can participate in a diversified investment portfolio that would otherwise be challenging to build on their own.

Because of the fact that they are pooling money from multiple investors, mutual funds can take advantage of economies of scale. This means transaction costs are spread out among the investors, making investing in a mutual fund more cost-effective than buying individual securities.

Mutual funds can be an attractive investment option for many individuals due to their diversification, professional management, and accessibility. However, like any investment, they come with their own set of risks.

Mutual funds invest in a portfolio of securities, such as stocks and bonds. These assets are subject to fluctuations in the financial markets. If the overall market experiences a downturn, the value of the mutual fund’s holdings may decrease, leading to a loss for investors.

Crypto

Digital currencies have recently seen incredible growth. The field of cryptocurrencies is still expanding due to the growth of bitcoin (BTC) and Ethereum (ETH). But what exactly is crypto? [5]

Crypto, short for cryptocurrency, is a digital or virtual form of currency that uses cryptography to verify the transfer of assets, control the creation of new units, and maintain secure financial transactions.

Unlike traditional currencies issued by governments, cryptocurrencies are decentralized and typically operate on a technology called blockchain, which is a distributed ledger that records all transactions across a network of computers.

Aside from initial coin offerings (ICOs), there are now several new types of blockchain investment products like non-fungible tokens (NFTs) and decentralized finance. [5]

One of the main reasons people invest in crypto is the possibility of significant returns on investment (ROI). Certain cryptocurrencies have experienced rapid price increases in the past, giving early investors substantial profits. As a relatively new asset class, it may behave differently than traditional investments like stocks and bonds.

Cryptocurrencies operate on decentralized networks, meaning they are not controlled by any central authority like governments or banks. This aspect attracts those who value financial freedom, transparency, and autonomy over their assets. In a modern investment portfolio, crypto may offer further diversification and profits.

NFTs

NFTs, or Non-Fungible Tokens, are unique digital assets that represent ownership or proof of authenticity for a specific item or piece of content using blockchain technology. Unlike cryptocurrencies such as Bitcoin or Ethereum, which are fungible and can be exchanged on a one-to-one basis, NFTs are indivisible and cannot be exchanged on a like-for-like basis due to their uniqueness.

NFTs can represent a wide range of digital or physical items, including digital art, music, videos, virtual real estate, collectibles, and more. Each NFT is distinct from one another, containing metadata that defines its unique attributes and ownership details.

When someone buys an NFT, they acquire ownership rights to the underlying digital asset. NFTs can be bought, sold, or traded on various online marketplaces, with ownership recorded on the blockchain.

Investors should keep in mind that NFTs themselves are not an asset class. They fall under the category of cryptocurrency, meaning they also use blockchain technology. NFTs use blockchain technology to digitally signify ownership. NFT is more similar to owning the title to a car rather than the car itself. [6]

NFT ownership appeals to some investors because their investment is secured by a blockchain. It is a highly accessible type of investment that allows anyone to invest in it. Investors also learn more about blockchain technology while diversifying their investment portfolios.

However, you also need to keep in mind that just like other investments, this also comes with certain risks. NFTs themselves are not strictly an asset class, and NFT generation is highly

Real Estate Investments

Real estate refers to property, which includes land and any structures built on it, such as houses, apartments, commercial buildings, and other tangible assets. Real estate is a tangible form of investment that can generate income and appreciate in value over time.

Real estate can be a part of an investment portfolio through direct property ownership or real estate investment trusts (REITs).

A solid real estate portfolio can give you plenty of benefits. A well-located rental property, for example, can give savvy real estate investors strong cash flow through rental income. Experienced real estate investors know how to build their real estate investment portfolio in a way that provides predictable cash flow, tax advantages, diversification, and excellent returns. [7]

Historically, real estate has shown the potential to appreciate in value over the long term. While there can be fluctuations in the short term, well-located and well-maintained properties tend to increase in value over time, allowing you to build wealth.

Rental properties are ideal because people always need a place to live. A real estate investor can purchase an apartment complex and continuously generate passive income. This makes it possible for them to leverage real estate in order to build wealth. [7]

If you get into the real estate investing business, you can enjoy tax breaks and deductions. A real estate portfolio manager will tell you how to take advantage of the many tax breaks that are available to you for investing in real estate. Generally speaking, you should be able to deduct the reasonable costs of owning and managing a property, including the operating costs.

The cost of buying and renovating real estate investments can also be depreciated over its useful life, meaning you can enjoy these tax benefits from your investment property for decades. [7]

Even with all the benefits of real estate investing, there are still some risks and challenges to look out for. For example, property values can fluctuate, vacancies can occur, and property maintenance can be costly. Real estate investment requires careful research, due diligence, and a clear understanding of the local market conditions.

Before investing in real estate, it’s advisable to consult with financial and real estate professionals or real estate portfolio managers to assess your individual financial situation, risk tolerance, and investment goals. Additionally, being an active landlord or property owner involves responsibilities, so it’s crucial to be prepared for the time and effort required for successful real estate investment.

Too Busy for Real Estate Investing? Choose Multifamily Syndication

There are many ways to get into real estate investing. But one of the best strategies in the real estate market right now is multifamily apartment investing.

However investing in a multifamily property comes with two huge challenges that investors need to overcome before they can enjoy its amazing benefits and strong cash flow.

The first one is the large capital needed to purchase an apartment building all by yourself. Real estate properties are generally expensive, so you can expect real estate investments with multiple units to cost even more, especially if it’s a much larger property.

The second challenge for investors is property management. Not everyone has the time or the experience needed to run an apartment complex all by themselves. That is a huge endeavor that requires time, energy, money, and patience. Property management is no joke, especially if you have no experience as a landlord.

The good news for accredited investors is that there is an exclusive form of investment that solves both of these problems.

Real estate syndication is similar to mutual funds in that it involves multiple investors pooling their funds together. But the difference is that this deal will only purchase a single real estate property. This syndication deal is arranged by a syndicator who acts as the General Partner (GP) and looks for accredited investors who will serve as the Limited Partners (LP). [8]

The syndicator will formulate the business plan, locate the real estate property, build the legal structure, and look for investors who will provide most of the capital needed in exchange for a share of the cash flow. Syndicators often form a limited liability company (LLC) or a limited partnership (LP) for the purposes of this deal.

Because multifamily properties are generally more expensive, and because they tend to bring in more cash every month due to having multiple units, multifamily syndication is the most popular version of this deal. Despite the fact that syndication deals can be made with any type of real estate, multifamily syndication is considered ideal because of the many benefits of owning a large rental property. [8]

With a syndication deal, real estate investors no longer have to buy a large multifamily property on their own. They can enjoy all the benefits without putting in as much capital as they otherwise would have to. It solves one of the major barriers to entry that keeps investors from investing in apartments.

With multifamily syndication, even the property management problem is solved because the syndicator takes care of it as well. Investors can say goodbye to the usual headaches associated with being a landlord, making it a true passive investment.

Multifamily syndication is a welcome alternative for investors who do not want to purchase a multifamily property and bear all the risks alone. With a syndication deal, there are multiple investors sharing the risks and the profits. [8]

Best Real Estate Investment: Why Accredited Investors LOVE BAM Capital for Apartment Investing

Syndicators are tasked with putting the deal together and even handling the day to day operations of the building. If you are interested in real estate investing but want passive income without the responsibilities of being a landlord, multifamily syndication is the right choice for you.

The most challenging part is looking for a trustworthy syndicator to work with–but the good news is that we have you covered on that front.

BAM Capital is an Indianapolis-based syndicator that prioritizes high quality real estate investment properties that are Class A, A-, and B++, particularly those that have in-place cash flow and proven upside potential. [9]

BAM Capital is known for its consistent track record, vertical integration, and strong Midwest focus. As a vertically-integrated company, BAM Capital can guide you through every step of the syndication process, handling everything from negotiating the purchasing of multifamily properties to handling property management and renovations.

This company even has an award-winning strategy that mitigates investor risk while creating forced appreciation. In fact, this syndicator now has over $700 million AUM and 5,000+ units. [9]

No investment is without risk. Make sure to consult your investment advisor or speak to a BAM Capital investment team member before making any financial decisions.

For accredited investors who want to enjoy the passive income and all the other benefits of being in a multifamily syndication, look no further than BAM Capital. Schedule a call with BAM Capital and invest today.