The Holy Grail of Investing: How I Bulletproof My Investment Portfolio

Everyone knows that I like to invest in real estate, both through my own real estate portfolio and more passively in syndications and funds. I’ve been fortunate enough to acquire cash flow real estate that covers my expenses and my lifestyle, but I’ve been in the situation before where 90% of my portfolio and net worth was tied up in those assets.

While I continue to believe that real estate is the best vehicle for creating wealth and financial freedom, I also believe that every asset class, whether real estate, stocks or Bonds go through cycles. If recent history has shown us anything, it’s that we can’t rely on the past as an accurate sign of future potential.

Thinking about all of this raised an important question: does it make more sense to invest deeper in specific channels for maximum profit or should I seek to spread the risk by investing in a wider range of assets?

According to Ray Dalioa billionaire hedge fund manager (and arguably one of the most successful hedge fund managers of all time), having 13-15 uncorrelated and low-correlated assets in your portfolio helps you control the downside and mitigate your risk while still being able to achieve good returns.

In other words, having a significantly larger portfolio reduces your risk because you don’t have to worry so much about an investment going bad at some point. He calls it the “holy grail of investing”.

So I took this as a personal challenge and looked at my current portfolio to see if it reflected this strategy. And I realized that while I had significant investments in real estate and business, I had very little in other asset classes.

With this in mind, I searched my own holy grail and expanded last year to create a portfolio of uncorrelated assets – some were for cash flow, some for future appreciation and some for mitigating downside risk. Within my portfolio itself, some of these assets are smaller portions, while others have grown in size over time.

Here are examples of some of my other investments outside of real estate:

#1: Stocks

In the past, I’ve done the bare minimum to invest in stocks as part of my 401K. But over the past year, I’ve slowly increased my stock portfolio by investing primarily in index funds, as well as a few individual stocks that I believe have long-term potential. I plan to keep them as long as needed.

I’ve found it best to keep my stocks in a tax-efficient account, like a 401(k) or Individual Retirement Account (IRA). However, I have increased my stake in a taxable investment account as it gives me quick access to capital if needed. I’m also building it to set up the possibility of large margin lending.

#2: Goods

Commodities are one of the asset classes known to be an inflation hedge (the other is real estate). Given the times (inflation), I have looked to increase the commodities I have in my portfolio.

I have invested in gold, mostly through gold indices. The logistics of buying physical gold seem daunting to me, so owning GLD shares is much more accessible.

Although I have invested heavily in sustainable energy (more on this below), I have also invested in mineral rights through fractional ownership. Oil and gas are also considered commodities that rise with inflation.

One way to invest in this asset class is to receive royalties from the oil and gas extracted from the areas in which you hold the mineral rights. If the price is high, so are your royalties.

#3: Cryptocurrency

Although there are differing opinions on cryptocurrency, after observing what some of the smartest entrepreneurs are investing in and where cryptocurrency is being adopted by respected countries and even endowments, I have become a follower as an asset class.

There’s obviously a ton of volatility and whether or not it’s really uncorrelated with the stock market remains to be seen, so I’m investing in the coins I’ve been seeing for a while, bitcoin and ethereum.

I invest in crypto both by holding these coins but also by investing in bitcoin mining. Mining is the process by which bitcoin is produced, and if you can produce it for less than your cost, then you are making a profit. So I slowly increased my investment in this area and freed up a good amount of cash from it.

#4: Sustainable Energy

In addition to our current energy needs as a society, we need sustainable energy development in facilities such as solar and wind farms so that we can continue to grow. So I invested in venture capital funds that are trying to solve the energy problem and the storage of that energy.

I have also recently invested in electric car charging stations as I believe these will be the new gas stations in the not too distant future.

#5: Debt

Even though I failed to invest in debt thanks to peer-to-peer lending, I invested in real estate debt funds. Here, your investment acts as a bank: when money is loaned, you earn money through interest and fees.

#6: Companies

As an angel investor, I have invested small amounts in a few select companies to help accelerate their growth. Although the odds of success investing in one individual business may be low based on statistics, I think if I invest in 10 of them, chances are good that something will happen.

I also launched several businesses during the year that produce stable cash flow. As the net operating income of these companies continues to increase, the valuation of these companies also increases.

#7: Risk Mitigation Fund

Investing in a risk mitigation fund is like having insurance if the stock market suddenly takes a dive. It protects your portfolio from market declines. They are basically insurance products that trigger with sudden drops of 10-20% in the stock. Considering the times, I thought it was worth investing in this type of product as well.

To bring it all together

Much like Ray Dalio, I firmly believe that staying diverse is the best way to protect against downside in any situation. I am always looking for ways to diversify my cash flow as much as possible in order to thrive, regardless of economic conditions.

Although I haven’t reached my goal of 13 or 15 uncorrelated assets yet, I believe the range of assets I’ve already invested in will create a strong portfolio that can provide stability for my future and that of of everyone around me. Ultimately, I believe this is the way to protect my investments so that I can continue to live the way I want to live.

How many uncorrelated assets do you own and what different things do you invest in?

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