I Love Models…
By J.P. Dahdah, Founder & CEO of Vantage
Although pretty people are great, I am not talking about fashion models. I am talking about investment models. The irony is regardless of which one I reference, what makes each of them a “Super Model” is the value they can produce. Successful investors don’t leave things to chance. They have very specific criteria about everything concerning their investment. Financial models allow you to work the numbers through various market scenarios to determine if the end result (AKA projected return) is satisfactory based on your desired objectives. Models also allow you to customize various factors of a deal on paper prior to placing real money at risk. Lastly, my favorite characteristic of models is they help eliminate the emotional component of an investment transaction which can commonly increase the chances of making a costly mistake. Models allow the numbers do the talking and ultimately should produce the validation if the alternative investment deal makes sense or not.
Regardless of what alternative asset strategy seduces your investment appetite, you should hesitate to put retirement savings at risk without using a proven investment model. To make models as effective as possible, it is essential you place realistic numbers in each segment that it comprises. Start with the end game in mind. If your investment portfolio calls for an alternative fixed income allocation that produces 8% yield (i.e. secured private loan), maintain your discipline and don’t get distracted with deals promising 16%. Sure, making twice as much money seems fantastic, but we are talking about two completely different deals, risks and strategies.
When you invest with purpose, each transaction fits perfectly into your overall financial picture. If you enter an investment and your only goal each time is “I want to make as much money as possible on this investment” then I urge you to take a step back, take a deep breath and rethink your plan, because that isn’t much of one.
You wouldn’t start a business without a business model you felt confident would produce your expected results, right? I encourage you to apply the same mindset with your alternative IRA investments, since investment models are critical tools for wealth building. If you don’t have any of your own, seek assistance from professionals that specialize in your desired asset strategy and ask for their models. If they don’t have any, then walk away as fast as you can. Successful investors and professionals alike know the value of using proven models to help make the most informed financial decisions.
As always, happy alternative investing!!