Jaspreet Singh is a popular financial personality with more than 1.7 million subscribers to his “Minority Money” YouTube channel. Singh tries to give his listeners an insight into his strategy for financial freedom, primarily through the use of real estate to generate cash flow.
However, what might surprise some of his less-frequent viewers is that Singh himself dabbles a bit in speculative investments, although he doesn’t recommend that all people mirror his portfolio. In a Q&A Singh held with GOBankingRates, he answered the question, “How should someone split their retirement investments among options like 401(k) plans, real estate and more?” Here are some of the insights offered by Singh, along with an analysis of whether or not these choices may be appropriate for certain investors.
Singh’s Approach to Investing
Cash flow is the cornerstone of Singh’s approach to investing. He believes that investors achieve true financial freedom when their investments are generating enough cash flow to cover all of their expenses, with some left over for discretionary spending.
His main method to achieve cash flow is to buy rental real estate. Singh began investing in real estate in 2011, when prices were at rock bottom and he was able to acquire rental properties at low valuations.
Singh’s Approximate Asset Allocation
Although Singh was 100% focused on real estate when he first began investing, he has diversified his portfolio over time. As he told GOBankingRates, “Since beginning my investment journey, I’ve diversified a bit. These numbers are estimates, but it’ll give you an idea of what I do. About 55% of my investment portfolio is real estate, 25% is stocks. 18% are speculative investments (things like startups and crypto), and 2% is physical gold. So your investing style might change depending on where you are in the economic cycle.”
Whether or not your personal portfolio shares the characteristics of Singh’s, the lesson behind his allocation has value in that it has evolved over time. As your own personal financial situation changes, the profile of your portfolio should change as well. For example, you can usually take on more risk in your account when you’re young than when you’re retired, and your need for income from your portfolio will likely change over time as well. For this reason, it’s best to use Singh’s asset allocation as something to learn from more than something to imitate.
Risk and Reward in Singh’s Portfolio
In an imaginary — albeit far from possible — scenario in which Singh’s real estate and stocks go up by 10% and his speculative investments trade to zero, his account as a whole would lose 12% of its value. The inherent risk in having such a large percentage of assets in the speculative category means that even if 80% of your portfolio is solid, consistent and reliable, you may actually lose money over the long run.
However, for those who can tolerate the risk, Singh’s portfolio offers potential upside as well. The income generated by the rental real estate and dividend-paying stocks is generally consistent and tends to go up over time, allowing you to reinvest more and more of your cash flow in additional investments. The speculative portion of the portfolio, although large, offers potentially significant capital appreciation — with the caveat that those investments must be chosen with extreme care.
Is Singh’s Allocation Appropriate for You?
Singh comes right out and tells anyone who may be reading his comments, “I don’t recommend what I do to anyone else because your goals, experience, and risk tolerance are different from mine.” This is sage advice.
Although some of the basic principles behind Singh’s method of investing are solid, not all investors share his financial objectives and/or risk profile. If you’re looking for income, for example, having a good portion of your portfolio in rental real estate and dividend-paying stocks may be appropriate. But having nearly 20% of your account in speculative assets like startups and crypto is likely too risky for most investors.
Singh also states that he doesn’t use instruments like IRAs or 401(k) plans, preferring to invest in income-generating assets. With few exceptions, money can’t be withdrawn from a retirement account before age 59½ without incurring penalties and taxes. So for an investor like Singh, who prefers to put his investment cash flow to work right away, they may not be the best option. But for the vast majority of investors, the tax benefits provided by retirement accounts, not to mention the employer match that most 401(k) plans offer, are huge advantages when trying to build long-term wealth.
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