Jaspreet Singh, the CEO of Briefs Media and host of The Minority Mindset Show, has made a name for himself as a successful entrepreneur and financial educator. His unique approach to wealth-building and investing has garnered significant attention in the financial world.
In a recent Q&A with GOBankingRates’ Jaime Catmull, Singh was asked how someone should split their retirement investments among the many options available. In response, he shared details about his investment strategy, shedding light on how he allocates his own capital among four distinct asset classes.
“When it comes to investing for retirement, I personally don’t use a 401(k) or an IRA. I prefer investing in real estate for the tax benefits,” Singh said. “In the beginning of my investment journey, I put 100% of my investment money into buying rental properties. This approach made sense for me because I began investing in real estate in 2011. This was when real estate prices were at rock bottom. So I went all in with real estate investing. Your investing style might change depending on where you are in the economic cycle.”
Singh noted that he wouldn’t recommend what he did to anyone else — every person’s goals, experience and risk tolerance are unique to them, and it’s important to make sure your investment style suits you. Singh said he likes investing for cash flow — that is, investments that provide you with regular income — so it’s no wonder he was drawn to real estate initially.
Singh’s Asset Allocation
As time went on, Singh’s investment strategy evolved to incorporate other asset classes. It’s a wise move for any investor — diversifying out of a single asset class, be it real estate or anything else, is a time-tested way to reduce your exposure to risk.
“Since beginning my investment journey, I’ve diversified a bit,” he said. “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% is speculative investments (things like startups and crypto) and 2% is physical gold.”
Despite diversifying over time, it’s clear that real estate is still the core asset of Singh’s portfolio. He mentions two factors that made real estate attractive to him — cash flow and tax benefits. The cash flow part is fairly obvious. As a landlord, you’re paid rent on a regular basis, ensuring there’s always a steady stream of income heading your way.
The tax benefits, however, can also be substantial. Operating expenses, mortgage interest, depreciation and even owner expenses like travel are all deductible, meaning they can lower your overall tax burden. Investors can even defer capital gains tax when they sell their property, via a Section 1031 tax deferred exchange. The details can get complicated, so make sure you consult a professional tax advisor if you’re interested in real estate investing.
Unlike real estate, which typically requires substantial upfront money to invest in, stocks are available to the majority of would-be investors. Many brokerages allow the purchase of fractional shares, so even if you don’t have enough for a single share of any particular company, you can still invest in a portion of one. You can also invest in a broad section of stocks through vehicles like an exchange-traded fund (ETF), allowing you to instantly diversify in dozens or even hundreds of companies at once.
Historical data shows that investing in the stock market can offer better returns than real estate, although stocks generally don’t come with the tax benefits and regular cash flow that real estate does. But the combination of attractive returns over time and accessibility that stocks offer make this an essential asset class for all investors.
Singh refers to a portion of his portfolio as “speculative investments,” including cryptocurrency and startups. Some in the finance world would take exception with mixing the terms speculating and investing — because things like startups or crypto have no underlying fundamentals, it’s impossible to value them in any meaningful way using the tools of traditional finance, meaning that speculating is very much akin to gambling.
That doesn’t necessarily mean that speculating can’t offer a good return — ask early investors in Google or Amazon. With the highest rewards, however, comes the highest risk. It’s important for investors to understand that their speculative positions are far more likely to lose money than make money. If you can handle that risk, and allocate your investment funds accordingly, then there is certainly nothing wrong with making a few bets.
Gold has long been considered a sort of safe-haven asset, serving as a hedge against economic uncertainty and inflation. Singh’s modest allocation to gold reflects his desire to maintain a degree of security within his investment portfolio.
While the historical data on gold indicates that its usefulness as a hedge against inflation may be questionable, it also provides a certain peace of mind. Being able to hold a bar of precious metal can make any investor feel safer.
Like real estate, investing in physical gold requires a certain amount of upfront money. For those who want exposure to gold but aren’t in a position to buy actual coins or bullion, there are plenty of ETFs out there that are backed by either physical gold or gold producers.
There Is No ‘Perfect’ Allocation
As Singh makes clear, what works for him may not work for others. There’s no ideal way to allocate your investments among this or that asset class. It all depends on your personal goals and your unique situation. Don’t follow any strategy blindly. If you aren’t sure where to start, consult with a financial planner or other professional.
Jaime Catmull contributed to the reporting for this article.
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