What Is Investment Buying Power?
I hear this all the time. “Well what can I invest in if I have $______?” Today I’m going to give you a comprehensive guide to what your options are at various levels of investment starting from less than $10,000 and moving our way up.
First, I want to preface that I do not consider the stock market investment. I also do not consider retail financial products to be an investment. This means stocks, bonds, mutual funds, ETF’s, annuities, etc will be left out of the conversation. Why? Because they are speculative vehicles, not investments.
Alright, let’s discuss what to do if you have less than $10,000. Foremost, you need to realize that $10,000 is really not a lot of money. Society may have you believe that it is, but the fact is that $10,000 will not do much for you. If we are excluding retail financial products as a viable option, you will pretty much have two options with this money.
Bullion will be your first option. This means gold and silver bars or rounds that you will take physical possession of. You will want to start with at least $500 for your minimum investment to really buy enough that it makes a difference. Now before you turn your nose up at bullion I want to point out that over the last 20 years bullion performed around 6–8% annually. Gold was actually the 2nd best performing asset next to real estate. The nice thing about this type of investment is that it is a real asset with intrinsic value and has no management fees or expenses. You buy it and hold it until you’re ready to sell.
The Sacred Account will be your other option here. This is a high early cash value dividend paying whole life insurance policy. This is guaranteed against loss, have a 4% minimum annual gross dividend paid to your account and over the last 151 years straight has averaged a 6–8% annual gross dividend. Not only that but this money grows tax free. The best part? Imagine still being paid interest on your funds even though you’ve withdrawn them from your account. The Sacred Account does just that. When access your funds, you still earn interest on them like they never left. Even if you never put the money back into the account. The Sacred Account is a minimum of $1200/yr to start and is best when you can do at least $6000/yr.
The next level is $15,000. At this level, bullion and the Sacred Account are obviously still an option, but another type of account becomes an option as well.
The Real Estate Index Annuity (REIA) can be used with amounts of $15,000 or more. Now, this investment grows with the performance of real estate, but is guaranteed against loss and does not come with any responsibility of tenant, financial, or property management because the investor does not actually own any real estate. This type of account is at its core, an annuity. Usually we won’t work with annuities, but I am mentioning this one as an alternative to earning 4–8% annually based on real estate performance with no chance for loss. There are no fees with a product like this either. Expect a 7 year hold period with an REIA.
Once we cross the $25,000 barrier, things get a little more interest. At this point, you can invest in something called a Life Settlement Investment. Simply put, you are buying someone else’s life insurance. This is usually an elderly person who owns cash value life insurance and has paid into it for some time. But they no longer want it and would like to sell it on the open market or to a fund. You as the investor take ownership of the policy. They are still the life being insured, but you buy their ownership, pay the premium, and name yourself as the beneficiary. This means when they die, you receive the death benefit. It is really a win-win because they are being cashed out for more money than they had in the policy and you’re getting the death benefit. This has no economic risk because the payout is tied to the life of a person, not to any sort of market performance.
Things get a real at $50,000. When you have this level of investment you can invest in two additional opportunities.
Secured Private Lending is the first we will mention. Imagine being the mortgage on a real estate deal. You get paid every month and you don’t have to do anything. Ever. That’s why banks loan you money instead of offering to buy the deal with you. They want the money of real estate with none of the work. A private lending deal will typically be 5–10 years in length. You will loan money for the purchase of real estate. You will be paid interest and principal over that time frame. If your borrower defaults, you can foreclose on them and take it over. But otherwise, you just collect your payments every month.
Real Estate Investing also begins to happen at this level. Now with $50,000 you aren’t going to buy much real estate. But you can invest in a fund. This is what I recommend because you can scale your returns and benefits to that of a larger deal, without being required to have that kind of money upfront. A real estate fund is usually going to be some form of limited partnership where you split the return with the fund syndicator or manager. These returns aren’t as safe as private lending, but still it is better than owning a piece of residential real estate where you have to manage it yourself. Ride the coattails of a bigger deal.
The final level we will talk about is the $75,000 level. One of my favorite types of investments becomes available at this level.
Direct Passthrough Partnerships usually involve oil & gas investing. A fund will invest in the drilling of oil on a proven and known oil field. You as an investor can invest as an active partner. This investment can at times pay 20–30% annually (not guaranteed and you must be accredited to invest). There are also significant tax benefits. First, an investor can deduct 100% of their principal off their income that year. They can write off the net income spread paid to the mineral right holders. Lastly, they can write off the residual drilling costs of the investment as well. What this amounts to is an instant return because of the tax deduction and potential for massive cash flow with annual tax deductions to offset the interest earned. Expect to be in this game 10 years. It may end sooner, but there is no guarantee of that. Assume it is 10-year money and be happy if the deal does cash out sooner than that.
Past that we enter into $100,000+ which is a very fund stage to invest in. Other options do open up, but it will be many of the same fundamental investments. That is what I love about investing. There are only so many things you can invest in before it is all the same. It is simple and easy to repeat.
So if you’re reading this right now and you’ve been wondering what to invest in, I hope this guide helps. If you’d like to invest in any of the opportunities you saw here just click here to schedule a free consultation to learn more!
Own Your Potential,
CEO & Founder of Wealth DynamX
Jerry Fetta helps his clients gain more financial knowledge, make more money, keep more of it, and multiply what they keep.
If you feel like one or more of these areas is costing you money and opportunity right now, then get more information about Jerry Fetta and Wealth DynamX by going to www.WealthDynamX.com/contact