Successful investing is less about becoming an expert in finance and economics, and more about making informed decisions based on a few foundational principles.
If you’re new to investing, you’re looking to build confidence as an investor, or you just want to get back to the basics so you can spend less time and energy worrying about your finances, here are three key concepts that can help guide your next investment decision.
1. Diversifying within a Specified Asset Class Can Decrease Your Risk
Most investors know that diversification is a useful tool for decreasing your investment risk. After all, if all your investments are tied to one location — or to one specific strategy within that location — you’re much more likely to feel the effects of market crashes and downturns.
However, many of the wealthiest people in the world find their biggest success by specializing in a certain asset class or area of expertise. Once they’ve gained that expertise, they are able to diversify based on the location of the asset, but they’re still working within an area they understand rather than generalizing with a wide variety of investments they know little about.
When you’re a newly Accredited Investor, you’re able to access a wealth of new opportunities, including investments in hedge funds, private equity, venture capital, and equity crowdfunding. Specialization within one specific area can help you avoid getting overwhelmed by the opportunities available to you, so you can find the best investments that match your goals and your expertise.
2. Tax Efficiency Matters More Than You Might Think
Many people view tax efficiency only as loopholes or deductions taken by the ultra wealthy, but in reality, a tax efficient investing strategy can benefit any Accredited Investor.
At the most basic level, tax efficiency is really about maximizing your investment returns while also minimizing the amount you pay in taxes.
This is important, because with most investments, the more money you make, the more you have to give to the government. Finding strategies that reduce your tax burden can help you hold onto more of your wealth, rather than working harder to earn more at your current tax rate.
At First Generation Capital Partners, we’ve identified one investment opportunity that provides previously unheard-of tax advantages for Accredited Investors. When you invest in carbon capture technology, you can both generate consistent returns and decrease the amount of money in your taxable, earned income “bucket.”
To learn more about reducing your tax bill with these incentives, check out our free guide:
3. Secure Your Future with Long-Term Investments
No matter what you’re investing in, it’s always important to know your goals. And if your goal is to build wealth for the future — whether that’s saving for retirement, providing for future generations, or taking the trip you’ve always dreamed of — then you should focus on investing for the long-term.
Strategies like day trading and investing in high-risk, high-return opportunities may seem like the easiest way to build wealth quickly, but if your goal is to grow and preserve wealth for the long-term, then patience is the key to success.
For example, say you purchased real estate when the market was hot in 2021. You may now be nervous about that investment because you’re worried the market will crash. But if you’re prepared to hold onto this investment through the inevitable ebbs and flows of the market, it will likely appreciate in value.
Even if the markets temporarily decline, historical data shows us that property values consistently increase over time, due to inflation. By the time you’re ready to retire in 20-30 years, that appreciation could be significantly more than the value you’d get if you sold your home in the next 2-3 years.
Similar concepts apply to the stock market and to many alternative investments. By focusing on your goals, you’re less susceptible to being caught up in the excitement of high-returning investments that promise a quick path to wealth, but ultimately don’t help you reach your desired destination.
Investing Doesn’t Need to Be So Complicated
If you’re looking for a partner who can help you find new investment opportunities, then our team at FGCP would love to connect with you.
We believe that investing should be a tool to make your life easier, freer, and less stressful. To make that happen, we focus on tax-efficient, cash flowing direct investments that fit your goals and needs. If you’re interested in learning more, please fill out this brief form to get in touch.