At Boron Capital, we get many of the same frequently asked questions. We decided to take this opportunity to answer some of our viewer’s most common questions. Zach is putting me in the “hot seat” so that we can allow more insight and clarity into what we do at Boron Capital. If you have ever found yourself wondering what an ‘alternative’ investment is or maybe you just wonder what type of investments we are typically interested in, today you will learn the answer to those questions and more. You don’t want to miss this episode!
Typically, people have been taught that investing means entering into the stock market, which is also referred to as the public market, so it’s no surprise when they are left wondering what exactly we do in the private market.
Since our first podcast aired a few weeks ago, we have been getting more and more of the same quality questions from our listeners.
Many listeners want to know more about alternative investments-- what are they and are they risky? Others wonder what type of investments our team at Boron Capital are looking for and what our typical returns look like.
Due to the increase in the same types of popular questions, we have decided to center today’s episode on answering those questions and a few more to try and clear up any confusion surrounding what we do.
I am essentially putting myself in the hot seat to allow more insight and clarity into our work at Boron Capital.
If you have been wondering some of these same things, today’s episode is for YOU!
Key Takeaways:
What are alternative investments? (4:28)
Are alternative investments risky? (7:25)
What investments are Blake and Boron Capital currently looking into?(14:44)
What are typical returns on Boron Capital’s investments?(20:45)
Looking forward to retirement...What are your options? (25:30)
Will commercial real estate be hit hard during these crazy times? (30:54)
What is the difference between what Boron Capital does and a REIT? (33:54))
We hope today’s episode was helpful for you to better understand what we do at Boron Capital. We tried to answer most of the commonly asked questions, but we are always open to answering any more questions you may have.
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-- DISCLAIMER: Past performance is no guarantee of future results. Any historical returns, expected returns, or probability projections may not reflect actual future performance. All securities involve risk and may result in significant losses. No communication by Boron Capital, LLC Inc. or any of its affiliates (collectively, “Boron Capital, LLC™”), through this website or any other medium, should be construed or is intended to be a recommendation to purchase, sell or hold any security or otherwise to be investment, tax, financial, accounting, legal, regulatory or compliance advice. Nothing on this episode is intended as an offer to extend credit, an offer to purchase or sell securities or a solicitation of any securities transaction.
- All right, this is a Solomon Investor podcast. I've got my buddy back with me, VP of Investor Relations, Zachary Morrow. How are we doin', Zach?
- What's goin' on, everybody? Excited to be here.
- All right, and you're a host, owner, and founder of Boron Capital. This is a Solomon Investor podcast. It's about the wisdom of King Solomon. The one who 3,000 years ago became a trillionaire, and he documented his story. We utilize the ancient principles of King Solomon, and they stand the test of time. 14 years, 300 plus transactions, and not one single investor's lost money. Now many of you guys, you're up, you're down, you're sideways, you're all over the place in the stock market. And so what we want to do is answer a ton of your questions. A ton of questions have come forward, and so Zach has compiled those, and we want to just start being a voice of reasoning. King Solomon was really big on wisdom. If you remember back in 1 Kings, while King Solomon is becoming the king, king of all of Israel, and all the kingdoms around him, King David had actually destroyed tons of the kings who were bad, and took ownership, and domain, and territory of those kingdoms. And then Solomon gained more territory and began to grow his empire. But before he became king, or as he became king, he did an offering to God surrendering saying, "I need your help, I need you to empower me "and give me your wisdom." And God asked him in a dream, "What do you want?" And King Solomon said, "I want your wisdom." Could have asked for anything, but he said, "I want your wisdom." And God said, "Because you asked for wisdom, it pleases me. "Because you asked for wisdom, "I'm going to give you more wisdom "than any other king before you, "and any other king after you. "I'm going to give you more wealth "than any other king before you." And so this is the process that we go through. And so as we answer these questions, we're going to give you mental frameworks to flow through on your investments, to help you solve your investment problems, and create sustainable wealth that stands the test of time.
- Yes! All right, so guys, thank you so much for those of you that have been connecting with us across all our different platforms. Whether you're consuming the website, YouTube, iTunes wherever it might be, all the social media platforms, we appreciate you guys connecting with us. And those of you that are connected with us in the text, you've opted in for our VIP Insider's List, and if you haven't, text Solomon to 31996, and you'll be included, those of you that have been connected with us have been leaving questions, and you want some clarity. So as Blake was mentioning, Solomon's wisdom, so today is about answering those questions, sharing some wisdom, and today we've got Blake, you're going to be on the hot seat. So I've got some questions for ya.
- Hello!
- And I am looking forward to getting those answered for all of our listeners, and talking through some of them and sharing insight on how they can start putting those things to work. So, ready to kick it off?
- Let's do it man, hit me.
- Okay. Dig in to 'em now, don't shortchange us.
- Okay, I got my boxing gloves on, you guys. You better be ready for this.
- All right. So first, we've had a lot of people asking questions like, so, you talk about stock market, the public market. So when you're talking like moving into a solid investment, it's like what are you talking about? Are you talking about alternative investments? Is this alternative investments? Like what are alternative investments?
- Yeah, good question. So let's start breaking it down. We got the stock market. We're going to call that, from here forward, the public market, public market. Most people don't know there's a private market. And in my book, "The Solomon Way" that's coming out, I detail out so many different golden nuggets that just are not spoken about in the 21st century anymore.
- And you're holding those back, aren't ya?
- You don't get none of 'em right now.
- They got to get the book. You get snippets on the show.
- The key is, there's a private market. There's a whole nother market. Another question is, is that alternative investments? I would say the alternative investments, let's define alternative investments, because we could call that essentially the private side, but let's define it. So this would be, let's define the public market first. So again, it's the stock market, the stock exchanges, the bond market, the currency market. This is where most people put their 401K, and it's typically held in a mutual fund. It's the index world. So all of those things, where there's actually lots of middlemen, and it's on the emotional tract of value, and then it's not collateralized by anything. It has to be standardized as the public market. The private market would be items like artwork, could be, if there's like a wine business, it could be gems, real estate, obviously real estate's a whole entire plethora of different veins, and octopus arms. Cryptocurrency could even be, depending on how it's traded could be alternative. I guess the final point on that question is all alternatives are not equal. And so that would be an understanding, to understand that they're not all equal.
- Got it. So big picture, the public market is everything that's on a public exchange, and then what everybody needs to know is the alternative market is everything that takes place really on a private level. So this is actual partnerships, and private partnerships, and different things like that, that can all take place in real exchange between people, rather than being publicly traded, and all that sort of thing.
- Yes.
- Got it. Okay, so the next question that I pulled, get ready. Everybody wants to know, well they're alternative investments because they're risky, right? Aren't alternative investments risky?
- When we ask a question, we obviously have a preconceived answer. So we're basing that off of mental frameworks that would bring that question about. What we have to understand is, look at the big picture of what risk even is. Risk is an assessment of gaining or losing. My percentage I'm going to gain or lose is my risk value. So if it's a high risk, I got a high chance it could go through volatility. If it's a low risk, then I've got a low chance it's going to go through volatility. Every piece of item in the private market would have it's own risk value. Everything in the public market which is unknown to most, it's actually all in the centralized bathtub of little duckies in the same bathwater. The stock market, another name for it, or the real name for it is the centralized investment system, the Centralized System. The entire thing's on the same electronic grid. So the emotions ride up and ride down. It's not correlated to an actual, direct earnings. It fluctuates on emotion, which means the stock value of the company could be super high, but the company earnings could be super low. It could lose money as a company, Tesla's a good example. The stock is soaring, but they haven't made any money yet. It's still losing money.
- The same with Hertz.
- Do what?
- Hertz is in the same space.
- Yeah, great example.
- I mean, essentially it's bankrupt, but I mean, their stock's rising right now.
- So you've got to understand that that would be a high risk, because it's not collateralized by anything. The emotions aren't tied, or the only thing tied to value is the emotions, and so it's not actually tied to the earnings. The private market, you have what we could call a three-dimensional investment, and that's going to be tied to the earnings, it's going to be tied to collateral, it's going to be tied to, which gives you a hedge of protection. There's actually no emotional value, because it's actually set as a fixed rate of return. So a fixed rate of return's very, very low risk value. We find these in real estate, certain specific niche industries, which we'll cover in a minute, hopefully, with some of his questions. But then you also have things like gyms, and art, and wine. That is more of the emotional side of the private market. It doesn't produce cash flow. So you and I, as a Solomon Investor, we want to think through the mindset of sustainable wealth is created through cash flow. Where I can get my return today, and I can compound it and throw it back in, or I can get my return today and put it in my piggy bank at home, and then let that money keep flowing in. That's called certainty money, so those are the low-risk alternatives. As a Solomon Investor, we go for private market investments. That we go in three-dimensional investments, which is typically in real estate or an online business, some kind of system, and in specific lanes of real estate. It's a three-dimensional investment, it has a low risk of value.
- Got it. So essentially you could classify what we do in the private world as alternative, but what people need to understand is, there's no one paintbrush that broad strokes across everything that defines risk whether it's alternative or not. Everything needs to be judged on it's own merit. So there's risky things in the alternative markets, or in the private space, but as a Solomon Investor, we're looking for particular things, and to gain those particular things, really the only place to do it is in the private market.
- That's a great point, and it's even understanding that inside the, even let's just say you're going like, "Hey, I'm good with going into real estate. "I'm going to go just do real estate "in single family on my own." Yeah, that's a good idea, right? And a Solomon Investor, you've got to understand, I want to create sustainable income and I want to create income that grows in exponential growth, so here's the difference. When you go into the private market, which is where a Solomon Investor would only be in the private market. A Solomon Investor would be in what you call a three dimensional investment, and we'll talk more about that as we go. But a Solomon Investor, we're at a fixed rate of return. So Solomon Investors only do a fixed rate of return. And six to eight percent, somewhere in there, you'd want to be at a fixed rate of return. And then you'd want to compound it. And so 30 years, here's to give you an example, 30 years, show you the low risk value, it's fixed. Doesn't go up, it doesn't go down. Doesn't go up, doesn't go down. In the public market is always a correction. Two to 10 years, there's always going to be a correction, every two to 10. But in the private market, if you're in a fixed rate of return, three dimensional asset, and you do it for 30 years, you can turn 100 grand into a million bucks. And it actually then turns into a 30% rate of return. Well how does it do that? Because that 8% compounds, 8% compounds, 8% compounds, 8% compounds, and literally your money starts just multiplying because your return is not added into the next percentage. And so if you set it and forget it, the thought line of the public market to leave it in for the long haul, well a Solomon Investor would be like, that's ludicrous, because it's going to ride the correction, it's going to ride the emotions. It'll never compound. But in the private market, if you're in a fixed rate of return, you can compound it, and make massive returns.
- Got it, so that really brings us into our next point. So one, you're looking for great cash flow that can continue to pay you now, and create compounding effect into the future. And so let's open it up. So people want to know, okay well, Mr. Templeton, what investments are you currently looking at? What are things you're doing?
- That's a terrible question, and we charge big bucks for you to find out. So unfortunately, this podcast is over. No, the reality is, it's very, very niched. And again, we walk in the wisdom of the Lord. So the first dimension, as you guys know, those who have been in on all the podcasts, the first dimension of a three dimensional investment is God-directed. King Solomon only invested with God's wisdom. He asked God for wisdom, and he only invested with God's wisdom. So, we're going to go where it's high cashflow, where it's typically a mom and pop industry, or it's something that plays the value card of a mom and pop industry, or it could be a place like, so, wedding venues. Wedding venues is a mom and pop industry. That's one that we actually know we can control the marketing, we can control the customer service, we can control the value, we can control the price. So this is way better than a public market investment. Self-storage facilities. That's a mature market. It's not as mature as the apartment world, but it's a mature market. You've got lots of big players in that market. But if we go into specific niches with certain softwares, that can get us in the door to certain certain portfolios, and we can buy portfolios, and then we can play value on those, that's a really good niche for us. Mobile home parks is a niche that we do a lot of due-diligence on. We are not the small guys. We're not the guys that's going to go buy a mobile home park. We would buy a portfolio of 20 mobile home parks, or 50 mobile home parks. Those type of investments should be a three dimensional investment. And then even like a digital asset. So, could be a continuity software that is digital, it's online, it's a needed service in growing business, a platform that is easy for people to flow into, it serves a purpose, it creates convenience, and removes steps in a business process. The software we're on right now, it's called Zoom. So that would be an example of, it's continuity, it's you pay a monthly fee to actually run on this process. So buying a company, buying companies like this, that would be considered, it's an intangible, and it has the cashflow production. It's got to be the third dimension, and again, this has to be God directed. And so in all the assets that we would buy, we've done 300-plus transactions in the last 14 years. In all the assets, we've had some, when we do massive due diligence, all of our check marks are happening on the numbers side, so it looks like a great deal.
- Right, these are good stories.
- And this is what most people would do, they would just like dive into 'em. "Look at the numbers, I did my due diligence, "it's a great deal." And then they get slaughtered, because they didn't walk in God's wisdom. And God's wisdom is invisible. Solomon Investors see past what the naked eye sees. Solomon Investors don't lean on their own wisdom, but in every way they acknowledge God, and he sets their paths straight. Look, if you're investing in today's world, you've got to actually have wisdom at a higher vantage point than what you're currently able to see. You've got to see in ways that no one else can see in the visible eye, and that's how you handle your investments is with God's wisdom. So every investment is God directed. It's a tangible or intangible that we can control. And then it has cashflow, and that's where we stay in our investment portfolios for our own clients.
- Got it, so that answers the question of what we're currently looking at. You brought up a couple things, and I just think it's, I know I'm not in the hot seat, but just, I want to be able to add to that just a bit, because it is important. You know, one thing we stress on all the time is control. And so as we're looking at portfolios and things like that, we're not just going into a single industry, where we're going to have one chess piece in that industry. We're looking for things that we would call vertical integration, and lateral integration. Where we can gain control in a market, and look at synergies across the board that allow us to have control. So as we're doing the due diligence, we're considering all the vertical and lateral considerations of how we can gain control in that market. And one thing you mentioned was the mom and pop markets where we can go in and have more control with lower varied entry, we're able to come in at a much higher, lower than the cost of the real estate in a lot of cases where we're coming out with equity on the front side. And so these are the types of things and considerations that you all should be considering in your investments, and they can be difficult to accomplish on your own, so finding the right team is imperative, and can help speed you up tremendously. So anyways, just want to touch on the vertical and lateral integrations.
- A great point.
- Synergies are extremely important as you're looking at growing outward. All right, well, let's move onto the next question. Our time is ticking down, so let's keep it goin'. This is the next question we're going to, "Okay, Blake, well what are the typical returns "that you guys see?" What do you got? Let me hear it.
- When we're talking about returns, you know, again, as Solomon Investors looking for sustainability. What we're looking for as a company is something that would then do that, create sustainability, that's what we just talked about. We go in and we take control of the asset. We're not literally just investing into we're sitting in a cubicle and investing into something that has a historical return. No, we're actually, we have the buttons, and can pull levers and push buttons to add new dimensions to it, to add new revenues, to cut costs. We're actually in the trenches on your investments. And so we have the ability to control the actual returns. What we have found, for our Solomon Investors, what we have found for you guys is that in a volatile market, who can beat a 30% rate of return? In a bull market, who can beat a sustainable 30% rate of return? Nobody. I mean, I talk to the greats, the Ray Dalios. They ain't beating the 30%. Berkshire Hathaway, they're not beating the 30%. They're not doing that now, they're not doing that in the bull market, they're not doing it. So, you and I, how can we do it? Well, that's what our Solomon Investors have the ability to do, and that's with the 8% fixed rate of return for 30 years. Now you and I know that you might only invest 10 years, or you might invest 50 years. The longer you invest, the higher that rate goes, because it's compounding. So the reason that doesn't work in the public market is because if you looked at the last 14 years, for example, in the public market, you would have hit from 2006 to 2020, you would have had a massive crash in eight, a good little chunk lost in 10 through 12, in pieces, depending on where you were, and then obviously you took a 38% hit in 2020. So you wouldn't have compounded. You know, we talk to our investors who have still had a foot, and a hand, and an arm in the market. One guy had four, I think four million in the market, and he had everything he lost in 2010 he had just come back to his principal, and he had built up, I think if I remember correctly, Zach, about 70% in that decade, and then he lost all of that in 2020. Thank goodness he didn't lose any of his principal, but he lost all the interest over the last 10 years. And so that's why it can't compound. And so a Solomon Investor, 8% fixed rate of return, compound that for 30 years, and you're at a 30% rate of return. And so, to answer the question, that's a typical return. For people who are doing larger amounts, we have investors who are saying, "Hey, I got five, I got 10 million. "Can we do something more? "I got bigger numbers, can we get creative?" Yeah, we do partnerships. And those kind of partnerships are on a bigger playing field. They can produce a 15 to 20% annualized rate of return, and that's very standard in our investments. So we're looking for deals that have strong mitigation of risk, and offer that attractive ROI. And our desire is to follow the Solomon way, the principles of King Solomon, and translate that for the 21st century, and allow you guys to reap the benefits of it.
- Very good. So, what you're saying is there's multiple structures that offer different rates of return, with some being a fixed rate of 8%, that can compound and grow, which over time creates that 30% annualized, whenever it looks at the lifetime of an investment, then you have other opportunities for partners and things like that where you come in and they can do direct partnerships, and they have opportunity to make higher returns.
- Right, you got it.
- Got it, okay. So here's one that we got in a couple different variations, this question, but the gist of the question is, "I'm retiring, or I'm coming up on retirement, "and I've got a 401K, I've got a pension, "I've got both, "what are my options? "Because I'm seeing that "I want to be able to do something else, "but I'm just not sure what to do, "and naturally I would just "leave the 401K with whoever's had it, "or the pension's with the company, "and they're just going to pay me my income "for X amount of time, "but obviously there's problems with that. "So I'm wanting to do something else, "I'm about to retire, what are my options?"
- Yeah, first of all, I would just remind you that you have been created by God to take authority and control of your investment. You know, most of us and most of our clients have been on the 50, 50, 50 plan. Working for 50 hours a week, for 50 weeks, for 50 years, and so you've been what we would call the peasant world for so long, now it's like, "What do I do?" So I want to encourage you, implore you, anoint you as king, I want to raise you up and say, man, whatever you have, if you still have a pension, praise the Lord, because they don't got those anymore, and you got some good money that got stored up, so praise the Lord, that was a blessing from the Lord. Right now, the time to step up as a king, and kings take control of their money, and they use a Solomon Investor, a Solomon General to actually take those funds, and put those in tangibles, so that they can actually build wealth. So, if you've got a pension, you got a 401, what you do, is those are typically going to be in the public market. So we want to remove 'em, I want to activate that, and take it out of the public market, we want to collateralize that inside your portfolio of three dimensional investments, and then you're able to bring massive cash in. One thing we have all the time that happens with those from 50s and 60s and 70s is they're like, "I don't even know what it's worth. "Like, I know I got, "I'm just going to say I know I got $850,000, "but what does that even mean?" Because you haven't had control, so it's like, "I don't even know the value of that. "Do I just start eating away at it?" The beautiful thing is, is like, if you're going to take cash flow, and you're not going to compound it, and you're going to like use it to live on, man, you've got a good nest egg. You know, on easy numbers, 800 times 8%, that's 64 grand a year that you could be literally doing what the uber wealthy do, taking the cash flow, living off the interest, never touching the principal, the principal stays fixed in a three dimensional asset. Fixed, doesn't ever go down. And then you're literally just creating money off of it. So absolutely, in those situations, if you've got a pension, you've got a 401, you got money to put to work. You know, Zach, we also, as you know, run into people who are like, "Man, I got 50. I got 50 in my 401. "You'd typically be using big numbers. "Is this for me too?" Look, 50, if you've already left that employer, and yeah, 50's 401K, yes, absolutely. We want to help you too. We want to help people become Solomon Investors. So you take that 50, and you do the same thing, and you compound it, that 50 turns, I don't have the number off the top of my head, but it's going to turn into something that close to that $500,000. And so you've got to actually activate it, and that's what we love to do to help ya.
- Yeah, that's really good. You know, a lot of people are in that position, and they're just not really sure about the options, and so, I just think it's important to note that if you're in a 401 or you're in a pension, there are options for you to stay in a tax-deferred, qualified plan, that allow you to invest in these types of investments. So we partner with national firms where you can go into what's called a Self-Directed IRA, so pensions can roll over, 401s can roll over. Obviously there are certain stipulations, so you know, it's not just everything, but if you meet the qualifications, it rolls over, stays tax deferred, and then you move into that kingly position, you get to direct into the investments that are Solomon Investments. So you go into a Self-Directed IRA, and you can start choosing, become the one who's choosing where the money's going, direct it into great investments, and move into a position where now you're empowered. You move into that kingly state. So, you know, people ask if you can invest, "I've got a 401K, an IRA, "can I invest that with Boron Capital?" That's our firm. Yes, that's what we do. We help people transition into a position where they can then invest those funds. So if you have that interest, just know it is an option, and it is available. All right, so probably got time for two questions, Blake. Yeah, we got time for two more, so I'm going to throw you a curve ball now. So a lot of people are like, "Hey, COVID, everything's crashed. "You guys have commercial real estate, right? "So, don't you think commercial real estate's "going to get hit hard in these coming times?" So what do you got to say to that?
- Yeah, first thing I would say is we're not commercial real estate. When I think about commercial real estate I think about retail. I think about the malls, I think about the kiosk, I think about office space. Will office space get hit? Bless their pea-pickin' hearts, COVID was not what sent people to go virtual, but it was just what popped the balloon to help them go virtual. Will that get hit? Yes. Will retail get hit? Yes. Will restaurants get hit? Yes. We are in a niche we would call private three dimensional. We wouldn't call ourself commercial real estate. So case-in-point, our investments right now are doing great. Our investments right now are doing great. For instance, in the wedding venue world, during COVID, during shelter-in-place, during everything closed down, we're doing virtual tours through video, and selling $15,000 weddings like this . So it's not about commercial real estate, it's about where you actually are invested, and that's what a Solomon General handles for you.
- Got it, yeah, so it's kind of like going back to the multi-family. You can't just paint it, or I'm sorry, not multifamily, alternatives. I was reading one of the other questions. Alternatives, you can't just paint it with a broad brush, you got to know exactly where you're at. And so where we're at right now, we've been able to be in a position of control, make pivots, make adjustments to stay in a strong position.
- Yeah, exactly. And if you guys, again, haven't signed up for our Insider Access, you need to text the word Solomon to the phone number 31996. This stuff is gold, but if you don't actually do anything with it, it's not going to benefit ya. You're going to be the one who ends up becoming the peasant, not the king. So if you'll text, Solomon, to 31996, we do live trainings, and we actually take you through the process, and you see how to activate your wealth, and see how to protect it, and collateralize it, and you see how to actually cash flow those funds. So, if you haven't done that, just a reminder, man, that's where the gold is.
- Got it. So, we went through that one pretty quick. We're going to get one more in here, and we'll wrap up. People talking about real estate, and we've got funds, right? We've got investment funds, and people say, "Okay, what's the difference between "what you're doing, and say a REIT for instance?" You know, most people are familiar with Real Estate Investment Trusts, right? That's a fund, it's real estate. What's the difference?
- A REIT would be what we would call backed by the stock. So the stock, it's two different entities. You have the actual real estate that sold value into the stock, but now, unfortunately, brrr, we're back to not being collateralized. We're back to the emotional game. And so as silly as it sounds, "Oh, I thought that real estate wasn't emotional? "I thought it wasn't fixed?" I know, but it's in the centralized system, and everything rides the rollercoaster. So if you look at the REIT world, from the last hundred years, you're going to see the rollercoaster again. And you're not getting both sides, you're not getting the actual cashflow and the appreciation. You might get in an investment if you're a real partner in an investment, like you would with us, but that's the main difference. Our investments are collateralized. Those investments are emotionally valued.
- Yeah, and one thing about REITs, and I'll just tell you, mutual funds are the exact same way. Most people don't realize this, because they look at a REIT or a mutual fund, and they're looking at it and they're saying, "Well, it pays me out X percent dividend. "6%, 8%, 10%, I'm getting a 10% return." I had this conversation a couple weeks ago with a gentleman, and he said, "I'm looking at this mutual fund, and it pays me 10%. "That's a good deal, right?" Well, we have to look at it, one, is it collateralized? "Well, it's diversified." Okay, well what's it diversified in? So it's not collateralized, it's not really diversified, because it's all in that same system where when it all went down, it all went down, when it went up, went up, so it's really just a rollercoaster, like you said. But what happens is, when you're in a REIT or a mutual fund, your principal amount, so if I invest a million dollars into that fund, and it's going to pay me say 6%, well what happens when it goes down, that dividend is in direct proportion to what my principal is at. So when I invest in a REIT or a mutual fund, when it goes down, let's say it went down 20%, okay, I lost 20% on a million, now I'm at 800, well my 6%'s off 800. So you didn't get 6% of a million, you got 6% of 800. Well, what if it then grew 20%? Well, now it's only back down to 960. Well, I'm getting 6% of 960, so even if I had 20% growth and my dividend, well you still didn't end up, your principal's down. So the problem with mutual funds, or REITs, or things like that is your principal ebbs and flows, and that dividend is based off of that ebbing and flowing, so it becomes real distorted of what you're actually getting in return, because they can report a number back to you, but if you don't take that number and go back to dollars, where are your dollars at, you're not really going to know the difference. And so in the private sector, what we're doing, we're fixing the principal against the asset. We're not driving it up and down, right? We're not driving the principal up and down. It's a fixed, you put in a million, it's a million. You've got that value, and you're looking for something to maintain value. So number one thing, you want to protect the principal to mitigate the risk, collateralize it, and then find a way to cashflow it. And so there are important things to notice that when you're back in that system, and the principal can ebb and flow with the rest of the market, it becomes real distorted.
- Yeah, I really appreciate you reminding us of that, because if you don't understand what you're investing into, and you then just lean over and ask the person who is a money manger in the public market where you should put it, but you don't understand, it's not a good investment for you, it's not wise. It doesn't produce wisdom for you, then unfortunately, 30 years later you get stuck, and you don't have a return to show for what you had. Another quick point on that is simply that that the appreciation built into that 6%, so hopefully there's a 2%ish appreciation, and then you got the actual fees of the money manager inside that, and so it says 10, but when you take out the appreciation, because you're not taking it out for 30 years, and you take out their fees, it's typically 3.17%, you're down to four or five percent. And it's not compounding, because you're still ebbing and flowing. So yeah, there's a whole lot more detail that's under the hood on a REIT like that.
- We'll have to break down how fees impact a portfolio on a different episode.
- So, if you want to know how your fees are impacting your portfolio, stay tuned. Hey guys, we really appreciate your hearts. We appreciate you guys joining us. You know, obviously there's so much more goodies to cover. So, again, the things that we want to give you are in the link that we'll send you when you text Solomon to 31996. Again, we're about family. We want to build family, want to build this family of investment relationship with you, and that's a blessing to us, because as the tide raises in our firm, if we can serve you and help you in that way, it raises the tide of all the ships. We have investors that have truly been with us the majority of our 14 years of 300-plus transactions, and I mean, they've been able to see the massive growth in their portfolios which is a huge blessing because adding zeroes to their portfolios shows us that we can add it to yours. So, again, it's been a blessing. This is a Solomon Investor podcast. We'll see you again soon, be blessed.