A Different Investment Strategy

by Krantcents · 25 comments

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An investment strategy is a set of rules, behaviors or procedures, designed to guide an investor’s selection of an investment portfolio.  Although I will share some of my investment strategies, I will leave it up to you to figure out what to do.  I believe in multiple income streams and assets that grow despite the fickleness of the stock market.

My Strategy

What do I invest my hard earned money in?  My first investment was in my first home.  It was a three bedroom, one and a half bath home with a pool.  It was $36,500 and it was a wreck!  It was in a neighborhood where most homes were valued at $48,000.  It was my savings that allowed me to assume their mortgage and my payments were less than my monthly rent.  I was looking for a home that was undervalued and needed some work.  I found it!  I sold it three and half years later for $78,000.  I took my equity and bought our dream house on the hill.  It was a five bedroom, two and half bath home in the hills overlooking Los Angeles.  I had a $50,000 mortgage, but it was worth $125,000.  Eventually, it was valued at $750,000.

My first house was a custom built house (Los Angeles) that needed painting, decorating and some serious repairs. The owners were going through a divorce and neglected the home.  It had a lot of great features and we had some work to do to showcase it.  We needed more furniture and bought some antique pieces to enhance our furniture.  I refinished many of those pieces and they are treasures.  These are assets and ultimately could be sold to realize their value.  Will I sell these treasures?  I do not know, but I could.

I was working for a Fortune 100 company that provided a pension, profit sharing, benefits for my entire family.  I wanted to diversify and I started buying income property.  I bought a nine unit apartment building.  I could leverage my down payment and receive an income each month after all expenses.  Over time, I grew this into a business and bought a twenty-four unit and a ten unit. Typically, income property can yield 8-10% return on your investment per year.  The real value is the sales price of the property which increases based on the income.  It is a great hedge against inflation.

I built my income property into a business that provided income stability.  It was my foundation to get into other businesses.  My first was a fast food restaurant which provided great cash flow.  I added studio catering to take advantage of food and movie business in southern California.  I started to do consulting and diversified my businesses.  After ten years, I sold all of them.  I was faced with what to do with the proceeds.  I created a portfolio of IRA, Roth IRA and brokerage accounts.  It was invested in index funds, healthcare, biotech and some individual stocks.

Buying real estate at the right time is an excellent road to wealth.  I cannot give you a road map to buying real estate, but never buy when values are going up quickly because it can go down just as quickly.  It is better to be a seller.  I sold my Mother’s condo in 2005 and enjoyed a tremendous profit.  I reinvested the proceeds in real estate, but in a different market.  Although it has not appreciated much, it has not lost value. This is a long term investment and it is in an excellent location.

My parents made investments in businesses and real estate.  Their best investment was in my education!  I was fortunate to have private school education from kindergarten through college.  One of my first investments was in my children’s education.  This was a value investment; it matched my values that education is important.  I may not leave my children money, but I gave them the ability to make their own.  I think it is far more important to help them succeed than give them an inheritance.

When I was a child, people collected stamps, coins, baseball cards and autographs.  I participated in some of these collectibles and so did my children.  As an adult, I collected variety of things, but never thought about their future value.  My Mother collected tea cups, fine bone china tea cups.  My wife collects sterling silver tea spoons.  Over the years, we have accumulated silver flatware, crystal dinner glasses and serving pieces.  Actually they were wedding gifts that become very valuable!  I know it is boring stuff!  Some day when we stop entertaining, we can either give our children some valuable pieces or sell it.

There are other valuable assets that I can sell at anytime that may yield a new income stream.  In addition, I can sell art work, memorabilia, excess furniture, jewelry to name a few more.  There are more although, I did not invest in these objects.  Classic or antique cars, limited edition collectibles, comic books, dolls, books, records (vinyl) and figurines.  What do you collect that increased in value?  Almost anything old, original or first edition has value.  It can be toys, lunch boxes, clocks and many other things.  I recently read about vintage watches.  There are Patek Philippe watches that sell for millions of dollars.  I bought a good watch in 1985 that increases in value over the years.

Wrap Up

What should you invest in?  Perhaps it should be stocks and bonds, mutual funds and ETFs?  Why stop there?  I am suggesting creating a real investment strategy that includes everything.  This is how I see multiple income streams!    Will I sell everything?  Probably not, but I have a choice.  My Journey to Success chronicles some of what I did, but I thought I would give you more of my investment strategy.  What is your investment strategy?

Photo by: Sean MacEntee

Carnival:

Carnival of MoneyPros at Novel Investor
Yakezie Carnival at Money Q&A
Fin. Carn. for Young Adults at 20′s Finances
Carnival of Financial Camaraderie at Faith and Finance
Carnival of Financial Planning at Darwin’s Money

What is your investment strategy?

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{ 24 comments }

maria@moneyprinciple April 18, 2012 at 2:00 am

Hi Krant, this all sound very reasonable and provides interesting messages. One is that real estate is a great hedge against inflation; agree and will include also most economic turbulance. Even more important message is that our best investment is probably in education: ours and this of our children.

Krantcents April 18, 2012 at 6:43 am

Take what you think is important! I tried to identify additional forms of income too. Collectibles are generally overlooked.

Kurt @ Money Counselor April 18, 2012 at 1:16 pm

My challenge is identifying good value in real time, instead of only in hindsight. For example: AAPL has appreciated about 420% over just the past three years. Seems like a ‘no-brainer’ in hindsight, but I sure didn’t see it coming back in April 2009. (And I talked a brother out of buying AAPL when it’s price was in the $90s. Hope he’s forgotten about that.) What’s your technique for recognizing good investement value?

Krantcents April 18, 2012 at 3:47 pm

I let the professionals do it. I invest mostly in mutual funds although I have some stocks. My best pick was years ago, when I bought Amgen (biotech) at $9.00 a share. I sold at $45. I should have kept it though because it split a few times. No regrets, because I did well elsewhere (real estate).

Darwin's Money April 18, 2012 at 6:30 pm

Timely post – I just got the most nasty, ridiculous email from a jerk tenant that’s overdue on HIS payment (and he claims it’s because he complained about a leak and it wasn’t fixed quickly enough for his liking so he’s not paying his rent). Total nut job.

Anyone that thinks landlords are these rich slumlords taking advantage of people that can’t afford to buy, think again. We’re putting up with deadbeats and miscreants and spending a lot of time earning the money contractually due to us.

Krantcents April 19, 2012 at 6:41 am

I agree, welcome to rental property!

My University Money April 18, 2012 at 8:04 pm

Real estate is worrisome to me in the currently overheated Canadian market. Mutual funds have proven that they will almost never beat ETFs over time, so right now I’m actually just investing in expanding my side gig business, and it has been providing me with great returns!

Krantcents April 19, 2012 at 6:43 am

I believe in doing everything because they all have cycles. Nothing goes up forever!

Joe @ Retire By 40 April 18, 2012 at 9:58 pm

I love hearing your life story. I must stop by and meet you when we go down to LA. I am investing in real estate, but I am a bit leery of leveraging too much. I feel like we already borrowing a lot of money.
My strategy is mainly real estate and the stock market. I am working on the online income, but that is not easy money either.

Krantcents April 19, 2012 at 6:45 am

Anything worthwhile is never easy. This is one of the reasons to explore a lot of things. This past recession hit both real estate and the stock market. You want to hedge against everything.

Robert @ The College Investor April 22, 2012 at 1:17 pm

It is important to invest in something you’re passionate about. If you like real estate, go for it. If investing in the stock market interests you, do that. By having interest in it, you are more likely to spend the time needed to be successful at it.

Krantcents April 22, 2012 at 3:42 pm

Over the years, I found I was interested in real estate (home and income property), collectibles, antiques, coins, stamps, baseball cards and antique/classic cars. Someday I hope to buy a classic or antique car.

Financial Advice for Young Professionals April 22, 2012 at 10:07 pm

That’s a good point, it’s definitely easier to invest in something you’re passionate about. Probably why I’m only interested in investing in stocks/real estate :)

Krantcents April 23, 2012 at 6:43 am

Following your passion is easy, finding it is a lot harder! I enjoyed real estate more because I had more control over it than stocks.

Katie April 22, 2012 at 6:06 pm

My plan is to invest in real estate and then when that produces income I will buy more or invest in stocks.I love your story about investing in real estate, it’s very inspiring to hear about someone who has done so well.

Krantcents April 23, 2012 at 6:31 am

When my income property generated excess income, I either reinvested it or refinanced and invested in another property. Start small and see if you like it.

101 Centavos April 22, 2012 at 6:40 pm

Great diversified strategy, KC. One of our assets that we don’t think about much is our collection of handmade carpets that we purchased while living in the Middle East. On a whim, we took one of our Tabriz rugs for an estimate at a local rug gallery. Considering what we’d paid for it, we were a little surprised to get an estimate of $17K. We’re hanging on to it, as well as all the other ones.

Krantcents April 23, 2012 at 6:35 am

Multiple income streams can be very interesting because we initially buy things we like and then they increase in value. I am not suggesting to sell, but it is nice that it is increasing.

Bret @ Hope to Prosper April 22, 2012 at 9:50 pm

My great aunt and uncle were collectors. They went to garage sales and flea markets collecting thimbles and paper wieghts. They knew what they were looking for and they did well when they sold their collections.

He always tried to encourage me to start collecting, but I was too intersted in the stock market. I may have to diversify into something more stable, like collectibles.

Krantcents April 23, 2012 at 6:38 am

I went into collectible and antiques because I liked them, increased value is just a plus.

Financial Advice for Young Professionals April 22, 2012 at 10:05 pm

I didn’t know you were so invested in real estate, that’s awesome! Personal finance and real estate are probably two of my biggest hobbies/passions. I purchased a condo 2 years ago in San Diego and I’m currently saving for a 2-4 multi unit complex down here. I think real estate and stocks(index funds) are really all you need.

Real estate is the only investment where you can put in 20-35% of the initial investment but still receive 100% of the assets!

Krantcents April 23, 2012 at 6:41 am

I have been out of income property for years. I enjoyed it while I owned it and made a lot of money, but no longer have the tolerance to deal with it. I agree leverage is an advantage and the IRS supports it with a deduction too.

Buck Inspire April 29, 2012 at 9:48 pm

You have all bases covered KC! Invest in everything. Love your thought about giving your kids an education so they can make their own money. What is that saying? Teach one to fish rather than hand over the fish?

Krantcents April 30, 2012 at 6:30 am

Very true! General education, personal finance and values all contribute to independence and more choices in life.

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