Have you ever tried to sit on a two-legged stool?
Of course you haven’t (hopefully). Why would you? It’s neither safe nor stable.
Have you ever tried to build a retirement portfolio with only one or two “legs”?
If you’re like most individuals, you’re probably doing it right now.
Take a second, and think of your retirement plan as a stool. How many legs are you currently supporting it with? Do you invest in the stock market through a 401(k) or IRA? If so, that’s great. It’s usually the first leg investors are able to build. It’s easy to start, easy to oversee, and usually offered directly through an employer. Unfortunately, this is the only leg most people spend time building. As you can imagine, this is neither a safe nor a stable strategy.
So what are the other legs in a good retirement plan?
Over the past three generations, my family has passed down one simple, yet effective, investment philosophy. The best investment portfolios all contain a minimum of three legs: at least one personally-held business, a real estate portfolio, and a well-diversified stock market portfolio.
The basic premise is obvious. The more legs you have to balance your retirement plan on, the safer and more stable your future will be. A diversified portfolio of this nature will help protect you from the various ups and downs that are inherent to investing. When the stock market fluctuates, your business and real estate portfolios are there to provide more reliable cash flow. This allows you to stay invested in the stock market through all market cycles, which is a sure-fire way to build a successful stock portfolio.
Matthew Vitlin is a Fee-Only financial advisor with Reliant Wealth Management. He helps individuals and families from all walks of life start, grow and manage long-term investment portfolios. As Vice President of Finance for Nevsky Prospekt, LLC, (a family-operated real estate investment portfolio), Matthew is highly skilled at looking beyond traditional stock market investments for his clients.