Here at HappyNest, we want to help you achieve your financial goals. That’s why we have developed Loose Change, a tool designed to help you build your nest egg consistently and organically with your day-to-day purchases.
We know it can be hard to put aside chunks of cash into investing accounts. Loose Change allows you to contribute to your investment portfolio incrementally – a few pennies here, a nickel and dime there – over time. A little change in your growth strategy can add up to a big change in the long run. That’s especially true when it comes to building wealth. As the old saying goes: It’s not timing the market. It’s time in the market.
Consistency and time are the no-so secret ingredients. Loose Change was developed to make contributing to your financial future easy, manageable, and methodical.
How it works
As you go about your life, Loose Change will track your daily purchases and calculate the number of cents it would take to round up the total to the next nearest whole dollar.
For example, if you buy a coffee and your total comes out to $3.69, Loose Change tallies an additional $0.31 cents to bring that purchase amount up to $4.00 even.
That $0.31 is called a Round Up. That $0.31 round up gets pooled with other round ups from the rest of your regular purchases.
Every time your cumulative Round Ups reach $5.00 total, we’ll automatically deduct that amount from your linked bank account and invest it in your HappyNest account. Contributing to your financial future will be a built-in part of your daily life.
How to opt-in
Loose Change is only available to current HappyNest investors. In order to sign up for this feature, you will have to have an active account with HappyNest.
You will also need the most up-to-date version of the HappyNest app. You can check that you have the latest version by going to your personal profile on your device’s App Store. If you have an older version, you’ll see a button that says ‘Update.’ (You know what to do.)
Once you have the latest version, hop back into the HappyNest App and login to your account.
At the top of your HappyNest home screen, you’ll see a banner that says ‘Try Round Ups for Free.’
Click on that banner, and you’ll be directed to the Loose Change self-guided setup process.
After agreeing to the terms and conditions, you’ll connect either a credit card or bank account through our partners at Plaid.
You can connect Loose Change to credit card, debit card, or bank account. Round-ups will only be tallied based on designated linked payment sources.
Tracking your Loose Change Round Ups
Once you have connected a payment method to Loose Change, you will be able to view your purchase history and the resulting round ups in your HappyNest account.
This activity log can be found on your HappyNest profile’s home screen.
Turbo charge your nest egg
Loose Change also offers a multiplier feature on round ups for those who want to turbo charge their portfolio contribution activity.
You can access the multipliers feature by clicking on Account Settings on the Loose Change activity log screen.
There you’ll have the option to add a 2x, 5x, or 20x multiplier to your Round up contributions.
Try Loose Change for free
As a HappyNest investor, we invite you to try out Loose Change free of charge. We want you to see for yourself what a difference your Loose Change can make over time.
This free trial is good for six months. After that, you can continue to use the feature for just $1 per month.
FAQs
Can I link more than one account/card to Loose Change?
Currently, Loose Change only supports one linked payment method. We recommend linking your most active account or card to maximize your regular spending activity’s impact on your investing portfolio.
When I go to sign up, it shows Round Ups as ‘coming soon.’ Am I not eligible to sign up?
If you see ‘Coming soon’ in the opt-in banner on your home screen, you may have to log out of the app, turn off the ‘Remember me’ toggle on the login page, and sign in manually.
Once you log back in, you should see “Let’s get started’ where ‘Coming soon’ appeared before. If you continue to see ‘Coming soon’ after logging out and logging back in, please reach out to us at info@myhappynest.com and we would be happy to assist. You can also send us a chat message.
Will Round Ups be charged to my linked credit card?
No. If you link a credit card as the purchase log on which to base your Round Ups, the actual drafts will still be deducted from the bank account you have linked to your primary HappyNest account.
Bottom line
Making your money work for you is the key to financial success and independence. Loose Change is an easy and effortless way to grow your nest egg. Combined with other tools such as our auto-invest feature and dividend reinvestment option, you can manageably build your portfolio into a passive income producing machine.
The king of e-commerce has partnered with Salesforce CEO Marc Benioff in the Space Race. There is formidable competition. Virgin Galactic founder Richard Branson, already a legend in air travel, has his own space ambitions, as does Tesla Founder and CEO, Elon Musk.
But back at mission control, Bezos is moving in on a neighborhood near you.
Fintech enters the housing market
Arrived Homes is the latest fintech app that aims to remove obstacles between individual investors and wealth-building opportunities.
At first glance, Arrived Homes seems like it’s lowering the barrier of entry to the real estate market. This will ring like a siren call to Millennials and Gen Z, already significantly behind where the Boomers were at this stage in their lives by measure of property ownership.
But things aren’t always what they seem. Peeling back just one layer reveals that Arrived Homes could lock Millennials and Gen Z out of homeownership for good.
Moving the goalposts
The cost of housing in the United States is primarily a function of supply and demand. As Millennials pay off student loans and negotiate salaries that resemble progress on paper, the cost of homes is always one step ahead. The price tag is always increasing a little faster, always just out of reach.
Data source: FRED St. Louis
Raises and promotions never seem to keep pace with the rising cost of living, creating a confusing life conundrum that has resulted in postponement of marriage and a free fall in birth rates.
Millennials are now in their late 20s and their 30s, and Gen Z is on the shores of adulthood. Both cohorts rightfully want their share of the proverbial pie.
Supply and demand, demand, demand
The pandemic brought on a Millennial wave of Urban Flight, as lockdowns made city dwellers realize just how small their living spaces really were. The influx of buyers in the already-tight liquidity market has led to home sales closing over asking prices by double digit percentages. According to Redfin, 70% of buyers faced bidding wars in May of 2021 – up from 52% of buyers in May 2020.
Source: Redfin
Juxtapose that against a market whose supply stock has been stunted by city ordinances and permits, largely reserved for large developers with deep pockets. Not-so coincidently, those same developers also happen to be the benefactors of the housing subscription model.
Another sneaky force adding pressure in the mix is the rise of AirBnB. The short-term rental app took even more housing chips off the table. Its platform further incentivized the mindset that houses are investment assets to capitalize on – not homes that people need to live in.
These pressurized dynamics were already driving double digit ‘appreciation’ in real estate. According to a June S&P Global report, the U.S. housing market gained 14.6% in value year over year between April 2020–2021. At time of press, that trend is showing no sign of slowing.
Changing lenses
The real estate market’s ‘appreciation’ percentage gain is one way to present the fact that renting Millennials and Gen Z are now 14.6% further behind the American Dream, which for our intents and purposes here, starts with owning a home. It also loosely translates to “rent is probably going up soon.”
That makes for two demand-side pressures contributing to the price increase in the housing market, while the supply side has remained stagnant. How will we solve this problem?
One solution that definitely won’t work: Jeff Bezos’ latest project, Arrived Homes. Presumably, it’s about to throw gasoline on an already overheated market.
Jeff Bezos is a man of profound talents. But great talent can be applied to bad visions with harmful ramifications. Indeed, misguided ambition can amplify the fallout of a small-context vision.
American Dream for sale
Arrived Homes will accelerate the transformation of the American Dream into an ‘investment class’ that appreciates. That’s a big change from its place as a milestone of “making it,” and symbolism of freedom and independence.
The housing market’s assetization is reminiscent of the successful conversion of higher education into an investment, which learned everything it knew from the capitalization of health care.
Arrived Homes creates an access point for investment capital to flow into the pressure cooker that is the American housing market. It creates more demand without a corresponding supply expansion. You don’t need a finance degree to understand that when demand exceeds supply, prices will continue their exponential climb.
Getting buy in
As material wealth continues to consolidate into fewer hands, young adults will continue to find themselves in perpetual debt without ever owning anything.
Still from World Economic forum YouTube channel for editorial commentary purposes
In fact, the World Economic Forum came right out with recommendations to get comfortable with the idea of perpetual serfdom. What a message. But don’t worry: We’ll be happy. The economists at the World Economic Forum, who are much smarter than us, said so. Apparently, their cum laude is supposed to mean we’ll believe anything they say is true.
Intentionally or not, Arrived Homes deceptively positions itself as granting access to a market that it is actually shutting people out of. Americans don’t need partial ownership in rental properties: They need a primary residence. The number of renters officially eclipsed the number of homeowners in 2018, and the divide has been growing ever since.
The math isn’t hard: Every property added to Arrived Homes’ portfolio is one house’s status going from owned to rented.
Collective commercial real estate investing
But it doesn’t have to be this way. HappyNest is a collective investing, real estate fintech app that, first of all, arrived to the market before Arrived Homes did. Our platform gives real people access to a market they never could realistically consider – the literal inverse dynamic that Arrive Homes creates.
HappyNest seeks to help people grow their primary nest egg, by opening doors to wealth-generation opportunities without slamming the doors on other future prospects. That’s because HappyNest’s investment portfolio consists of commercial and industrial properties, a lucrative asset class that has historically only been available to the wealthy and connected.
But by pooling capital from real people, we can cultivate access to possibilities we couldn’t accomplish individually. By teaming up with HappyNest, investors aren’t indirectly driving up living costs and minimizing their homeownership prospects in the future.
Jeff Bezos’ next move
Wouldn’t it be wonderful if Jeff Bezos instead applied his incredible gifts and talents to something that enriched communities, not just board members? The man has the world at his fingertips – any further personal wealth accumulation at the expense of others is no longer ethically justifiable by ambition alone. It’s hard to imagine there would be a tremendous change in his living standard compared to what he’s established after his first few hundred billion.
We already know Jeff Bezos can accomplish whatever he sets his mind to, for better or for worse. Who will be impressed if he makes another successful business? At this point, it’d be more surprising if he didn’t. Any more wins in this arena are expected – boring, even.
Dramatic Crossroads Yu-Gi-Oh Card by AlanMac95 on DeviantArt
Perhaps Bezos should consider expanding his definition of value and worth. He could challenge himself to look beyond dollars, patents, property, and copyrights. He could focus on drawing up the blueprint for more conscious capitalism – one that is focused on ‘win-win’ as opposed to ‘win-more.’
Can Bezos sell the vision of a cleaner, more equitable world? Could he work out the operational inefficiencies in energy production and consumption? Can he set up the infrastructure for every American to get quality health care with Prime-level speed? How about cut the cost of lifesaving products like insulin while still maintaining enough margin to support a healthy business?
Can he change gears now, from building an empire, to investing in a legacy?
We hope we live to see it. If Jeff Bezos were to pursue a venture like that – we’d buy the first share.
Thinking two steps ahead
But with this next venture – Arrived Homes – the answer appears to be ‘not for now’.
Perhaps the allure of becoming the world’s first trillionaire is something he simply cannot resist. It almost seems that the biggest weakness of the world’s most successful man is one most of us can relate to in some way or another – our own egos.
Once he’s conquered the real estate market to his liking, he might still have time to achieve his greatest feat yet – merging aptitude with empathy, while Millennials and Generation Z sort through the damage his monumental success has inflicted upon their lives.
Until then, we invite you to think not just one, but two steps ahead in your investing journey. Together, we can get our share of the American Dream, too.
REITs have consistently ranked among the highest return investments over time, which is why they have been an investor favorite for decades.
Real estate is a historically high-performing investment
In fact, over the last 30 years across ten different investment classes, REITs have taken the
#1 spot for highest returns eight times – more than any other asset class. For those years that they didn’t snag the #1 spot, they ranked second or third an additional six times.
This year proved to be a rough one for REITs, closing out at a net loss. But smart money knows that a down year can also be a prime entry point. After all, the goal is to buy low, sell high.
For the capitalist who sees the opportunity where others see obstacles, here’s the 360 on all things REIT.
What is a REIT?
REIT is an acronym for Real Estate Investment Trust.
In a nutshell, they are companies that pool investor capital to invest in real estate or real estate products. The gains on these investments are in turn distributed among shareholders.
REITs were defined and passed by Congress in 1960 under the Cigar Excise Tax Extension.
The idea was to give average Americans – who might not have the means to buy more than one property – the opportunity to take part in and enjoy the fairly consistent gains from real estate investments.
The act outlined requirements to qualify as a REIT under law. REITs are incentivized to meet these conditions through tax advantages. The big fish reward is that the company does not have to pay corporate taxes if they meet REIT qualifications.
REIT Qualifications
No corporation wants to pass up tax breaks. They’d rather hit these key numbers than rendezvous with the IRS come springtime:
75%
Percent of total assets invested in real estate, cash or U.S. treasuries. Also the percent requirement of revenue generated from real estate-related income such as mortgage interest rates, rent on property, or profit on real estate sales
90%
Amount of taxable income that is paid out to shareholders – a nice perk for investors, courtesy of Uncle Sam. HappyNest intends to pay out 100% of its net income to shareholders.
50%
The maximum amount of shares that can be held by 5 people or less. Coupled with this requirement is that within the first year of an REITs formation, it must have at least 100 investors in the pool.
Unlike many investments, investing in REITs typically produces regular income in the form of dividends generated from rent or mortgage interest payments.
2. Investing in REITs is accessible to the average person
While it would be great to be in a financial position to buy numerous properties and collect rent monthly, for most people, that’s simply not financially feasible.
REITs offer the ability to participate in real estate investing without having hundreds of thousands of dollars at the ready. With real estate investment apps like HappyNest, for example, investors can buy in with as little as $10.
3. Liquidity
Compared to traditional real estate investment property, buying into and selling out of most REITs is easier and more streamlined and requires a lot less paperwork.
4. Hands-free management
Ask any landlord and they’ll tell you – managing properties is a lot of work. Between filling vacancies, managing tenant requests and complaints, and building maintenance, a lot of time and money can go into the administrative side of real estate.
REITs handle the operational side of real estate investments, so investors can skip the 3 a.m. calls about plumbing issue emergencies.
REIT Taxonomy
Although it may seem difficult to understand all there is to know about investing in REITs, let’s start with the basic building blocks.
Remember in biology class when your teacher covered taxonomy trees? You know, kingdom, phylum, class, order, family, genus, species, etc.?
No? Okay, well, pay attention this time – there’s money on the line.
There are several categories…of categories…of REITs. Very meta, we know.
To make things a bit more digestible, it might help to start with a visualization, then get into the nitty-gritty.
If REITs were a taxonomy hierarchy, they’d look something like this:
Every REIT has a ‘class,’ ‘order,’ and ‘family’ component.
For example: American Tower Corp is a publicly-traded (class), equity-based (order) REIT that primarily manages telecommunication infrastructure sites (family) around the world.
Breaking Down The REIT Taxonomy Hierarchy
Class: Investment acquisition strategy
REITs can be categorized by how they accrue capital for different forms of real estate investing.
They fall into three main categories: Publicly traded, public non-traded, and private.
Publicly traded
Publicly traded REITs trade on stock exchanges like the NYSE. Anyone can buy a slice of a real estate portfolio whenever they want.
Pros
Cons
High degree of transparency
Registered with the SEC
Ability to generate a high amount of investment capital quickly
Easy to buy and sell (highly liquid)
Able to be grouped into ETFs. This means the value of the REIT’s share can be affected by the performance of other REITs and sectors as opposed to solely on the performance of the underlying portfolio.E.g.: If a REIT has a strong year but is grouped with low-performing REITs in ETFs, the REIT’s performance will be adversely impacted.
Public, non-traded
An REIT can be public without being traded on a stock exchange like the NYSE.
HappyNest falls into this category. Though anyone can buy shares of our portfolio of properties, the shares are not listed on the NYSE or anywhere else. We see this as an advantage – and 2020’s bottom lines back us up.
This year, the value of the properties in our portfolio appreciated. But not every sector of the real estate market was quite so lucky.
Had our REIT been publicly traded on exchanges, it’s likely it would have been grouped into other REIT ETFs. Because of this grouping, our returns would have been smaller. It’s the stock market equivalent of “guilty by association.”
Instead, our performance is tied directly to and only influenced by the appreciation of the properties in our portfolio, all of which gained this year.
Pros
Cons
Registered with the SEC
Performance of investment tied to underlying asset value alone – insulated from swings in the market at large
Ability to quickly raise capital from investors since anyone can buy in
Not bought and sold as quickly (less liquid)
Less transparent, harder to tell share value
Fees
*(HappyNest does not charge for broker commission of platform fees)
Information provided to the SEC may not be independently verified
Private REITs
Private REITs are not listed on exchanges and not offered to the public. As the name implies – they aren’t open to everyone.
Private REITs are not required to register with nor report to the SEC. More often than not, they are only offered to “accredited” investors, otherwise known as very wealthy people that can take the kinds of financial gambles and hits that would put the rest of us on the streets.
Though private REITs have produced higher returns than publicly traded ones, they come with significant risk. Without an SEC registration, there is little to no oversight on their performance and operations. That makes these kinds of REITs particularly susceptible to fraud.
Management fees can be high and unsubstantiated. Investors must put their full trust into the board of trustees.
Pros
Cons
Potentially higher returns compared to traded REITs
Partially insulated from stock market fluctuations
Lack of transparency
Must be “accredited” investor
*net worth of $1 million, not including primary residence or income of $200K+
Not registered with the SEC
High management fees
Can require long holding periods (low liquidity)
Class: Type Of Asset Managed
The ‘class,’ (in our REIT taxonomy hierarchy) is the type of real estate assets managed by that REIT. These primarily fall into two categories:
Equity
An equity ‘class’ REIT owns real estate investment properties. The REIT manages, buys and sells, or collects rent from those properties.
They generate income and profits via market appreciation of their assets. That could include things like rent payments from properties they own outright or a rent payment that exceeds their own mortgage payment on that property.
For example: An REIT buys a property for $100,000. Their mortgage payment is $1,500 a month. They are able to rent it out for $2,000 a month. That $500, minus overhead expenses, is profit for the REIT – 90% of which must be paid back to shareholders by law.
Mortgage-based
Mortgage-based REITs provide capital to borrowers much like a bank does. They generated returns via interest paid by the borrower during repayment.
Unlike the ‘order’ (investment acquisition strategy) which is either/or, asset types can be diversified within an REIT.
Two Harbors Investment Corp, for example, engages in both mortgage-backed securities as well as owns a portfolio of properties. Its income is generated by a combination of rent, asset appreciation, and interest paid on mortgages it holds.
Family: Real Estate Sectors
Lastly, within the real estate market, there are sectors.
Examples of real estate sectors include:
Residential
Commercial
Retail
Industrial
Healthcare facilities
Data centers
Telecommunications infrastructure
The sector in which a REIT operates can have a huge impact on the bottom line, and the performance of each sector can vary year over year.
A retrospect of 2020 demonstrates just that. As millions of workers across the world were sent to work from home, office buildings and retail storefront worldwide stood empty as leases lapsed and were not renewed.
As a result, office REIT’s year ended with a net loss of almost 20%. Around this time last year, office REIT investors were celebrating 30%+ returns.
Meanwhile, e-commerce demand skyrocketed. In May of this year, even fast shipping MVP Amazon had to remove non-essential items from its 2-day prime delivery schedules.
All that demand meant the need for shipping fulfillment centers, part of the industrial sector, increased significantly. HappyNest has an industrial property in its portfolio, currently leased by shipping logistics company FedEx, that is enjoying this appreciation.
Properties in HappyNest’s real estate investing portfolio
Choosing The Right REIT For Your Investment
At the end of the day, every investor wants to protect the value of their investment and gain a little alpha along the way.
Though 2020 wasn’t the best year for REITs as a whole, some sectors thrived. Even for those that didn’t, as the old saying goes: Buy low, sell high. The dip in performance could prove to be a great entry point. REITs have historically outperformed stocks and other asset classes consistently.
Successful REIT investments are often the product of accurate predictions of what comes next.
HappyNest remains confident in its portfolio of properties’ ability to weather – and even thrive – in the upcoming year. Are you ready to start investing in REITs?
That’s why investors are looking to diversify their portfolio by investing outside the stock market in alternative investments.
What are alternative investments?
It’s easier to characterize alternative investments by what they are not. They are not cash, public stocks, and bonds. Consequently, they are generally less liquid and longer-term strategies.
On the upside, they open numerous avenues and opportunities ranging from safe investments with steady yield to high risk-investments with potentially quit-your-job returns. But where to start?
Here are seven of the best stock alternative investment ideas investors can consider.
Alternative investment 1: Private REITs
Barrier of entry: Moderate
Risk factor: Low
Potential returns: Above average
One way to get into the real estate market is through a private REIT. They have all the characteristics of REITs traded on the stock market, except they are privately held.
Real estate is widely considered to be a safe and reliable investment over time. Private real estate investment group are also insulated from stock market volatility since the aren’t caught up in EFT and other stock collectives.
A private REIT uses pools investor capital to purchase and maintain property. As a shareholder, you buy into that portfolio and enjoy the property value gains.
One of the biggest upsides to investing in property is that it generates income. Most alternative investments require capital to be tied up for an extended period of time, and any profit only comes at the point of selling. Real estate also accumulates profit for the point of sale in the form of market value. But it also had the added benefit of generating income while your capital is invested in the form of rental payments.
Compared to buying investment properties and managing them independently, REITs are a ‘set it and forget it’ investing strategy that involves zero late-night tenant plumbing emergencies nor tens, if not hundreds of thousands upfront for a downpayment and a commitment to a mortgage.
HappyNest, for example, allows investors to buy in for as low as $10. By investing in HappyNest, you become a partial owner of our portfolio, which includes an industrial shipping facility currently on a 10-year lease with FedEx and a commercial pharmacy on an 8-year lease with CVS.
Right now, there’s little doubt the United States in poised for growing inflation in the years ahead. Trillions of dollars were printed and put into circulation without a corresponding growth in economic output.
That’s bad news for savers, and impetus enough for investors scrambling to find stable, alternatives to preserving their net worth.
That’s at least part of why cryptocurrencies have gained so much traction from investors.
Once considered somewhat of a joke by big-name investors, the attitudes around Bitcoin and other digital currencies has taken a drastic turn in 2020.
With global markets volatile and the future opaque, a currency independent politics, governments, and stock markets look pretty appealing nowadays.
Flagship Bitcoin has trail-blazed for other cryptocurrencies to get on the radar of institutional investors. Major companies like Microsoft, Shopify, PayPal, CashApp, and Amazon (through a third-party app) now accept Bitcoin, with more on the way.
Some of the brightest minds of our time have taken public interest in the space. Their involvement all but guarantees the space’s growth for the foreseeable future.
The upside to foreign and cryptocurrencies compared to other alternative investments is that they are highly liquid. You can also invest just a few dollars if you want to, so the commitment level is low.
This stock alternative investment has a promising long-term trajectory that is becoming increasingly difficult to dismiss.
However, there are still challenges ahead. The space will likely continue to experience high volatility in the coming years, so investors have to be able to stomach that.
That being said, the whiplash to those price swings can generally be remedied by zooming out on the time chart. The overall trend is still a steady march upward and forward.
Alternative investment 3: Gold, silver, and other precious commodities
Barrier of entry: Moderate
Risk factor: Above average
Potential returns: Variable
At the end of the day, gold is widely considered to be the best alternative investment of all time. After all, it is the undisputed GOAT when it comes to currency longevity. Silver and other precious commodities like copper,
There are several ways to get into trading these, but gold enthusiasts believe in its long term value as a hedge against the collapse of FIAT currency and/or the stock market.
There’s some truth to this claim. As the purchasing power of the dollar declined in the wake of the Great Recession, gold’s price went parabolic.
goldprice.org
Precious commodity hodlers argue that it has intrinsic value not only in its widespread recognition, but because it also has industrial applications.
On the long term, the upside of gold and other precious commodities has held up for those with patience and long-term horizons. Gold holders had to ensure a major price correction and 7-year sideways period before finally seeing some movement to the upside in late 2019.
Alternative investment 4: Private credit: Private debt
Barrier of entry: Low
Risk factor: Above average
Potential returns: Above average
Peer-to-peer lending cuts the middle man (i.e., the bank) out of lending.
Through platforms like Lending Tree or Peerform, you can lend money (investment) to a person or a business. Then, you play banker and charge interest on repayment.
The returns on private debt can be high – in the double digits.
But for every yang, there’s a yin. High potential returns come with high potential risks.
Applicants’ risk profiles oftentimes do not meet the loan criteria for standard banks. That’s something the private lender (you) have to be willing to take on. If the borrower defaults, well, c’est la vie.
That being said, peer-to-peer lending as an alternative investment idea tends to perform better in economic downturns. That’s because banks become more risk averse and tighten their lending criteria.
In a study released in August of this year by MarketWatch, the peer-to-peer industry was projected to grow by 30% – a sign that investors aren’t quite bearish on this alternative investment strategy just yet.
It’s also worth noting that the industry as a whole saw a high growth period after the Great Recession of 2008 as the credit markets recoiled.
That could mean that 2022 might shape up nicely for those with a bullish risk tolerance.
Alternative investment 5: Private equity
Barrier of entry: High
Risk factor: High
Potential returns: Max
Embrace your inner hipster: Find the next big thing before it goes mainstream.
That’s private equity investing 101.
The key differentiation between private equity and publicly traded stocks is that stake in the company is not available to just anyone.
And just like the sharks, private equity firms generally invest in startups, privately held companies, and companies in distress.
They provide the capital the company needs, either to scale or overcome an obstacle, as well as ‘business management services’ (for better or for worse).
At the end of the day, the goal of private equity investment is to generate value and return for investors – and a lot of it.
The good news is, according to global capital management firm Bain & Company, private equity investments have generated a 60% higher return on investment compared to the S&P 500 over the last 30 years.
The bad news is that unless you spend your Wednesday afternoons on the golf course, private equity might be prohibitively expensive to get into.
A $250,000 would be on the lower end of the entry price to go through an institution – and to be properly ‘accredited.’ But keep in mind: that buy in is still the coach class, boarding group C of private equity.
Alternative investment 6: Hedge funds
Barrier of entry: High
Risk factor: Medium
Potential returns: High
Hedge funds are similar to private equity. They pool investors’ money and make strategic deals they’re betting will produce return. They’re also similar in that they require investors to be ‘accredited’ (read: a certified rich person).
Like private equity, a $250,000 minimum investment is par for the course. It can run many times higher depending on the firm.
The key differentiator between hedge funds and private equity is the types of asset investments they make.
Like private equity, hedge funds also buy stakes in private companies. But hedge funds investment strategies are more diversified.
They also invest in public companies, real estate, and tangible commodities that appreciate like gold, fine art, wine, and collectibles (rumor has it the hedge fund manager who bet big on beanie babies in the ‘90s is no longer in the business).
Big hedge fund managers are the celebrities of Wall St. – Ray Dalio, George Soros, and Bill Ackman. Those with the means to buy into their exclusive club can ride their coattails into the sunset.
Warren Buffett, is not a hedge fund manager. What makes him different? Unlike hedge funds, the average investor can ride his coattails…by buying public shares in his company Berkshire Hathaway – no ‘accreditation’ required. No wonder he’s America’s favorite billionaire.
But if you can swing it and meet the accredited investor criteria, hedge funds tend to be pretty hands-off investments. After all…you’re outsourcing managing that part of your wealth to someone else.
Alternative investment 7: Venture capital
Barrier of entry: Moderate
Risk factor: High
Potential returns: High
Venture Capital is what companies need to either kick off or start scaling. It is the earliest round of investing companies get as they start to dial up operations.
You can become a venture capitalist fairly easily thanks to angel investor sites. They allow you to browse through young companies seeking out capital. Many of them aren’t asking for millions. Some only need a few thousand to get through a financial bottleneck that’s holding them back.
If you’re seasoned in the particular industry, you could really hit it big as in the alternative investment space of venture capital.
But it’s important to understand that most businesses at this stage do fail, so. you are at risk of losing a large portion, if not all of your investment. Additionally, even if the company you invest in does ultimately achieve great success, the timeline you’d be operating on is long – several years, potentially a decade or more to see real returns from. As far as getting your investment back out earlier than that? Iffy at best.
So while Venture capital might be one of the highest potential alternative investment ideas, it also comes with quite a bit of risk.
Adding alternative investments to your portfolio
Now that you’ve expanded your view on potential investment opportunities, it’s time to consider if branching out makes sense to you.
If you’re portfolio is too concentrated in public equities and you want to manage your risk, allocating a slice of your net worth to a private REIT or other non-traded investment class will alleviate the pressure – and give you opportunities to catch big wins.
My name is Jesse Prince, and this is my financial journey.
I often think about the series of events that led me where I am today.
A vibrant childhood (I am the third of four boys), years of playing team sports, a 6-year-long military career – all formative experiences of being part of something bigger than myself.
It might sound cliché, but bear with me. I think many of you reading this will be able to relate.
The Prince Family principles
You see, growing up, my parents impressed two things upon us:
Never live outside of your means, and
Do good things.
When the time came for me to fly the nest, so to speak, I enrolled in the United States Military Academy at West Point, in accordance with these principles. (Go Army!)
Me in my Army days
By serving my country, I could sidestep burdening my family (or my future self, for that matter) with the crushing student debt that burdens so many young Americans today. It was a win-win.
After six years of active duty – including two tours in Iraq – my worldview had fundamentally shifted, to say the least.
Perhaps the biggest challenge of assimilating back into civilian life was that what had once satisfied my desire to “do good” just wasn’t cutting it anymore.
Frankly, I had to do something bigger. Something great. I wanted to have a meaningful impact.
But how?
Lost in combat
Three things serving in the military will give you: Thick skin, lasting life skills, and a deep love for learning.
That, and a paycheck every first and fifteenth of the month.
What the military doesn’t give you are the skills needed to manage that paycheck effectively. As far as I can tell, schools aren’t acing the subject either.
Growing wealth, saving for retirement, building rainy day funds – these might not be the skills you need to survive combat. But you sure as hell need them for a fighting chance at the American Dream.
When my time in the service was over, I found myself in a position I never thought I’d be in – aimless, unemployed, and defeated.
Overnight, I went from a Captain in the Army with command over 120 soldiers, to reading rejection letters from employers due to “lack of work experience” in my parents’ basement where I was living.
The transition was jarring and brutal.
I had neither income nor resources. The only thing lower than my self esteem at the time was my bank account balance. It was humbling. It was terrifying.
A lot of grit and a little luck
Fast forward a few months (and a handful of rejection letters).
There I was, standing in my parents’ kitchen (staring into my mother’s freshly packed refrigerator, oddly enough), when it struck me: “Speak the language of your profession.”
Of course. Classic Occam’s razor: The simplest answer is usually the best one. And as expected, something I had learned in the service would indeed guide my life outside of it.
I started with a list of all the things I find joy in. I’ve always had a natural interest in real estate – it seemed like now was as good a time as any to explore that further.
Step one, of course, would be to learn the language of the real estate industry. I was essentially starting my career anew. There was going to be a learning curve.
I didn’t just want to learn it – I wanted to master it.
I enrolled into graduate school with a Real Estate Finance degree fixed in my crosshairs.
At the same time, I looked for employment in the industry. Every soldier knows you never truly master your craft until you’ve had real combat experience. After what felt like a lifetime in the reserves, I was more than eager to get my boots on the ground.
Luckily, I stumbled upon a handful of amazing people who helped me do just that.
Building the nest
I’d always known real estate investing was an incredible way to build wealth. However, like most Americans, I didn’t exactly have mountains of cash at the ready to drop on investment properties.
So I turned where many of us do when we need answers to life’s pressing questions: Google.
A quick search for how to invest in commercial real estate without having to front large sums of money for a downpayment only brought up a GIF with a menacing Jack-in-the-box popping out holding a sign that said “better luck next time.”
Okay, okay…that didn’t really happen.
But it may as well have, because all I found were real estate investing platforms with high minimum investment requirements ($1,000 or more) and confusing, technical language.
Without access to wealth building investment opportunities, how could everyday people build their financial future?
I thought to myself, “If I, as a professional, am turned off by these platforms, I can only imagine what others are feeling.”
And then it hit me. I could satisfy my “do-something-great” drive by helping others live within their means while building wealth.
In other words, I could feed two birds with one scone. That’s how HappyNest was born.
My vision was to create a place where everyone – regardless of the financial hand they’re playing – can access an opportunity to build their wealth and improve their financial literacy.
HappyNest takes flight
I gathered the information and resources needed to help HappyNest take flight.
My first order of business was lowering the barrier of entry. A thousand dollars is a lot of money for most people – prohibitive even. It certainly was for me at one time.
Real estate was an investment asset class once reserved for the wealthy. We may not serve caviar or champagne here, but $10 will get you a seat at the table.
I made $10 the entry point because, at one point in my life, that’s all I had in my bank account. I like to think that if I could afford it on my worst day, others could also buy into the chance to change their financial futures.
My path hasn’t been the easiest, but I’m confident that I am not alone. I hope HappyNest can help you achieve whatever goals you may have.
And that is my most important mission to date.
Thank you for taking the time to read my story.
My name is Jesse Prince, and that is my financial journey.
