$5 Trillion In Stimulus And Your Portfolio
Three rounds of stimulus packages have pumped more than $5 trillion of newly minted money into the financial markets. And if you look at the stock market and bitcoin’s price, it’s not hard to see where bored and novice investors are putting their stimulus checks.
Since the stock market bottomed out last March in the early days of the pandemic and universal lockdowns, the Dow has since gained over 75%, currently trading at record highs. Bitcoin has been even crazier – increasing more than 1,000% in the same time.
Fueled by stimulus check after stimulus check and free and margin trading on popular trading platform Robinhood, investors are flocking to stocks and Bitcoin without discretion. No stock is beneath these investors who are buying up stocks of struggling companies and even ones that have filed for bankruptcy.
Bitcoin eerily reminds me of the dot-com boom. Here is an investment fueled purely by hype. Here’s why Bitcoin defies logic:
- It’s a terrible currency – not widely accepted as a form of payment online or otherwise.
- It’s not secure – constantly being stolen from one exchange or another.
- It’s not backed by the full faith and credit of any government.
- It’s unregulated.
Many experts agree that the stock market and Bitcoin are in dangerous bubble territory, and now that the money printing machine that was fired up in response to the pandemic has stopped, at some point, the buying frenzy will also stop.
While the stock market and Bitcoin surged, commercial real estate saw modest gains after the pandemic’s initial shocks. And while the Fed prints money, certain investors are printing their own money – investing in real estate as they always have – to sustain them through any economy and shield them from a recession.
Ultra-wealthy investors aren’t interested in the latest, sexiest, shiniest investment. They would prefer to stick to a tried and true investment that has weathered every storm – unlike the dot-coms and mortgage-backed securities of the world.
Real estate is boring, but it’s also loyal. It won’t abandon its owner, and that’s why investing in real estate the right way will insulate a portfolio from a downturn.
WHY REAL ESTATE?
Cash Flow. Passive income streams from recession-resistant asset segments or even ones that thrive in a downturn ensure freedom from the worry of losing income from a job because the passive income streams will continue to flow whether you’re working or not.
Diversification. Spreading your portfolio across multiple markets and segments ensures continued cash flow and growth – even in a downturn. Even if one asset suffers a dip, cash flow from the remaining assets picks up the slack until the faltering asset can recover.
Leverage. Letting someone who knows what they’re doing do all the heavy lifting allows investors to invest in multiple passive investments. Leverage is the only way investors can buy back their time and break from the confines of a job. Evaluating and trusting experts makes real estate investing headache-free.
Volatility-Free. Being not traded on any public markets has its virtues. The illiquidity of real estate prevents the herd from trampling your portfolio as it has done so often in past market crashes.
Investing in boring is ok when boring will insulate you from the next market crash, especially when these boring assets will continue to print money – ensuring continued cash flow to maintain your lifestyle – even as unemployment rises.
It is time to jump off the latest crazes and jump back on that trusty old train that’s been just chugging along after all these years.
Michael Foley, president and CEO of Humabilt Capital, oversees the entitlement process, funding, and operations for Humabuilt Capital. Mr. Foley has been a full-time real estate investor since 1995 during which time he has developed hundreds of single-family homes, townhomes, condominiums, and apartments. Mr. Foley started his investment ventures in Long Beach, California, and has expanded to Apex and Durham North Carolina. Mr. Foley is a graduate of the University of California at San Diego.