How to preserve and grow your wealth!
By: Tyler Suser, Account Executive of Investment Sales
Investments can be classified as being active or passive, and most investors will ask themselves at some point which is right for them. Although both have proponents who may argue otherwise, the answer isn’t always so clear-cut. The best course of action is to educate oneself on the benefits and drawbacks of each, and then make decisions based on what meets personal financial goals.
Active investing, as the name suggests, consists of taking a much more hands-on approach; constant buying and selling of assets, short sales, and various other short-term investments are the norm. Mutual Funds often use this strategy, with portfolio managers constantly scouring the market for trends, attempting to “stay ahead of the market” by buying/selling based on their findings. The most obvious benefit is the potential for very high short term returns. While that may be an exciting prospect for some, it also carries the weight of having increased risk. Many active investors utilize various techniques to hedge their bets (reducing risk), but even still this will usually carry more risk than a passive investment. Not to be overlooked are the fees associated with many active investments; many funds will take a percentage fee out of capital gains, which can easily knock an above-average return down to or below the market average.
Passive investing focuses on the long-term; holding on to assets and riding the historic gradual increase of the market over time, and resisting to sell during market fluctuations. Passive investors typically enjoy the benefits of low fees, lower risk, and more tax sheltering; but they rarely see astronomical returns in any short period of time, as with some active investments. Due to a lack of transactions, fees are very limited or nonexistent in most passive investments.
Real Estate has long stood as a shining example for passive investments, offering competitive risk-adjusted returns, equity building, and consistent cash flow.
These factors make passive investing very attractive for those looking for consistent returns, as it is an excellent way to build wealth while still taking a hands-off approach.
Overall, while active investments carry more risk, their high upside potential is still very attractive to the ambitious investor who is willing to accept that risk.
Passive investments appeal most to those looking to preserve and grow their wealth more conservatively, such as retirees or families looking to grow generational wealth.
Tyler Suser,
Account Executive of Investment Sales
The TCO ONE REIT, acquires multi-family apartments and mixed-use properties with the intention to bring consistent passive income back to you, the investor. This is your opportunityto invest in institutional quality properties at a fraction of the cost. For $25k dollars you get a fractional ownership in property where you earn passive income. This investment structure offers you the ability to invest in something bigger than what you could do individually.
Read more articles about Commercial Real Estate Investing on our company blog!
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