Investing in Alternative Assets

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Join me for Part 7 of the wealth building series on Wealth Office Hours Live as I break down alternative assets and how high-net-worth investors use them to build and protect wealth beyond the stock market. I’ll cover real estate investing, private equity, venture capital, cryptocurrency, oil & gas, precious metals, private lending, and buying small businesses — plus how alternative investments fit into your overall financial plan, diversification strategy, and long-term wealth building goals. Lastly, I will be answering your questions live!

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Transcript

SPEAKER_01 0:11

It's not just the stock market. It's just not stocks, bonds, mutual funds, ETFs, and a bunch of other stuff that's the same publicly traded companies packaged up into financial products for you to buy. That's part of wealth building, but it is not the whole thing. You need to be knowing, learning, and investing in other assets. And my goal today is to break down the wide spectrum of alternative assets you could invest in, give you some insights, some return profiles that we've seen over the last few years. And I want to let you know we have an incredible deck. I do not know that we will get through all of it. Um, I had Jared and Claude work on this in the office. They did a great job. They're a great team. Good one-two punch. And uh, you can download the deck by clicking the link in the description below. I highly recommend it. A lot of great detail in there. Um, some some of which um I may skip today. We'll see. We only have an hour to do this. Um, meanwhile, we have a full uh conference that goes two days about this. So we're gonna see what we can tackle here in an hour. Want to hit the first point though in the slide, and that is the number of publicly traded companies has decreased from a peak in 1996 where there was 8,000 publicly traded companies you could buy on the stock market with your brokerage account, your retirement account. You had 8,000 choices of different companies today, as of the most recent numbers in 2025, there are 3,800 publicly traded companies that you can buy. Half. You have half as many options over the last 30 years. I got the number right. Yeah, that's 30 years, okay, since 1996. Yet more and more people just keep investing into the stock market. Is that really where value is? Many companies, whether this is companies in the real estate category, technology company, I don't care what it is, whatever business they're in, many companies do not want to go public anymore or they are going to delay and they want to stay private. What does that mean? That means you can't just go buy it on the stock market. All these other investment opportunities and ways you can use to grow and build wealth may actually not be on the stock market. And so think of companies right now like SpaceX. All right, they're finally going public. SpaceX has actually been around for a while. You might think it's just been around for five years because you haven't heard much about it until recent, but it's been around for over a decade. Um, but it's finally now going public. And now it will be, you know, 3,801. I mean, we we used to have IPOs all the time. It was a big topic in investing in personal finance, is what companies IPOing. Now, hardly any companies want to IPO. In fact, more companies delist from being publicly traded and going private. So that means we cannot rely on the stock market alone as a place to invest because we are getting lesser and less options. Also, what other products do we have out there that you can invest in besides individual stocks? Mutual funds, ETFs, target date funds, and what are those? Those are the same companies they just package up into a fund profile. It's the same shrinking number of companies just repackaged up into a diversified portfolio that you can buy. So want to make sure we're on the same page share and right out of the gates, our choices are limited in the stock market. It is not getting better, it is getting worse. Well, what if I want to invest in the next cool company? What if I want to invest in technology, in other real estate plays? Maybe it's oil and gas. How am I going to do that? It might be in a private fund or other private asset, we'll talk about. So that's a problem. There's been a lot of criticism of this. A lot of people talk about um removing restrictions and how hard it is to become a publicly traded company. It's gotten harder and harder over the years. There's there's been fraud and bad actors. They tend to write a whole new set of rules that apply to all the people that weren't doing anything wrong. And now all of a sudden, shocker, no one wants to be a publicly traded company anymore. All right, so let's talk about what are alternative assets, and we'll dig into many of them here. Alternative assets are everything else besides the stock market. So think of the number one alternative asset you probably already own or may have invested in in your life, real estate, right? Real estate has been proven to be the most popular asset, and there's statistical numbers out there that more people have made become millionaires off of real estate than any other asset class. So real estate is definitely an asset, an alternative asset. I don't know how alternative is, it's been around forever. So, but it is in that alternative asset category. Also, private equity. These are private companies, private funds that you could buy in, that invest in, and grow uh private companies. Cryptocurrency, particularly Bitcoin, the fastest growing alternative asset that came out of nowhere over the last 15 years, but has um received hundreds of millions, maybe in the trillions by now, of investment dollars into cryptocurrency. We also have precious metals, we have oil and gas, we have venture capital that's more startups and new companies, not yet tested yet, but could have high upside. Um we have private lending and debt. You might be doing private debt or individual private lending. This could be in a fund, or you're doing loans one by one. Uh, so there's a lot of other assets there. We're gonna dig into each one of those, actually, that I mentioned here, and we'll see how much we can get through today. Uh let's look at the different returns on this of how things are doing. I want you to think about two things. One is when we're investing, we're investing typically over time. The best perspective is a long-term investment horizon. If you look at average returns, and these are averages, we're using general indexes here. Obviously, there's winners and losers within different categories. But if you just look from a 10-year period 2015 to 2025, Bitcoin is the number one performing alternative asset at a 49% annualized return over that 10-year window. Private equity is number two. Again, these are private equity funds that you could invest in individually or even with your IRA. And they're buying companies, selling companies, trying to grow and build companies. Next is large cap, US large cap. Those are that's the publicly traded companies in the that are large companies in the stock market, many of which would be companies in the SP 500, for example. And then you have gold, real estate, and it kind of goes on through different assets. Now, if we look at just 2025, the numbers are totally different. Gold was the number one performing alternative asset or asset period, beat the stock market, beat private equity, beat crypto in 2025. What's the new alternative asset that's gonna crush it in 2026, though? So, in some ways, you you need to be thinking about investing of, well, what do I know that can win over 10 years? It's a lot easier, I shouldn't say easier, it's more clear to see that than to know what's gonna win year by year. I don't know how many people called out gold as the going to be the number one performing asset last year. They certainly wasn't a lot of people talking about that, that that would be the number one performing asset. Now, as we're sitting in 2026, what's the number one performing asset? Is it oil and gas? Is it going to be? If you bought oil and gas investments in 2025, they're worth a lot more right now because of a war, because of the rising price of oil and all the stuff you hear about the Strait of Hermuz being shut down, and we're not getting getting uh oil and gas out of there. So it's constraining supply, raising the price. So that might be the winner in 2026. Who the heck knows? It's hard to predict these things, but you know the different assets, have conviction on where you're investing. But I think the easier approach, the point I'm trying to make here between one year and 10 years is it's more clear to see the winners over a 10-year window. Bitcoin has proven itself over the last 10 years. Does that mean it's going to continue on? I don't know. Does that mean after a Trump presidency, it's gonna fall off a cliff? I don't know. What I will say with cryptocurrency is because that is an asset that does not produce income, it does not, it is not a piece of real estate that can produce income. It's not a business that can have cash flow, it doesn't create money. I would be a little more speculative on it. I would not allocate over overtly to it. A lot of people are approaching Bitcoin now as the new digital gold, particularly younger investors prefer to rely on Bitcoin than they would an actual physical asset of gold, which also doesn't create income, does not create cash flow, but it is something that has been a store of value play where people place value on it and have for centuries. Is Bitcoin going to be that new asset? So think about these in context. Um, real estate. I want to talk about real estate here just for a second. We'll dig into specific numbers on it, though. But real estate's kind of been the doghouse over the last few years with rising interest rates. Most people are leveraging their real estate play. That is cut into returns, that's cut into purchasing power of new investors or new buyers coming into real estate. So that has really affected returns. We've all heard that story. But where is real estate positioned to go next? Even within real estate, you have different classes of real estate. All right, when we're investing in alternative assets, one thing that I think is always helpful is what are successful investors doing? Like what are the wealthiest investors doing? They typically have the most resources, the most professional staff. They obviously have the most money of which to invest in investment decisions, but what are they investing into? And if we check out the slide here, it's gonna it shows us that ultra high net worth investors are allocating the most. In fact, less than 50% of their portfolio is in the stock market in public equities. If you are an ultra high net worth investor, someone with 25 million or more of investable assets or net worth, I should say, um, you're not even putting half of your portfolio into the stock market. But as you go down, you see a lot more people like to invest in the stock market as you go down in the different size of investors. So um important point here, and there's different surveys that show a much wider stratification here. But the one thing you do see, no matter what surveys you're looking at, or what company is analyzed their database or their investors, is the more wealthy the investor, the more alternative assets that they tend to hold. One thing about alternative assets that's important to note is they are not as liquid as the stock market. One of the benefits of the stock market is you can get in and out every day. The downside to that is it causes massive fluctuations in value, which a lot of people hate on the other side of it. So we get a lot of price changes in the stock market, but you also get the ability to pull your money out. It's much more liquid than, say, a private asset, whether this is a real estate deal that you own directly or you're in a fund that's private equity or oil and gas or real estate, whatever it is. Those aren't as liquid of assets to draw on. Because of that, there is a premium most people say you get on an illiquid asset. It is called the illiquidity premium. Because this asset is not liquid, I should get a higher return than what I get in the stock market. And so if you're someone raising capital and you have an investment philosophy, whether you're a private equity fund, real estate fund, I don't care what you are, you're typically going to need to have an investment strategy that's can provide a greater return than, say, the S P 500 and the stock market, because the investor has an illiquidity option in that money where they are not able to access it as easily as they could the stock market. So they better be getting a better overall return. All right, let's go into some of these alternative assets. I want to highlight some pros and cons between the assets as you're thinking about them. Um, and there's there's much, much nuance around this, but I just want to note a few things. Real estate. One reason I love real estate and why it's been probably the most popular, most commonly used alternative asset is it creates cash flow if you're buying it right, and properties tend to appreciate over time. Now, when you're investing in real estate, if I'm buying individual rental properties, I've done that, you know, I've got individual rental properties. It's not liquid, but I can sell that when I want, right? I own the rental property on 123 Green Street. I can't cash it out tomorrow like I could something in the stock market, but I could at least list it for sale when I'm ready. And, you know, in three to four months, six months, whatever the time period is of how the market's doing, I could have that property sold and my money back out of it. Maybe I could also get a loan against it to draw equity out if I needed to use that equity. But as I individually own real estate directly, I do have greater control of it. And it's not illiquid. I would maybe call it semi-liquid, all right, because I have the ability to place it for sell. On the other hand, if I invest in a real estate fund, that money is usually tied up. I'm not calling the shots. I'm investing that money in a fund. I don't have to do any work though. There's a benefit to that, of course. Again, which I've done, I've invested in multiple real estate funds as an investor with my individual dollars, even my self-directed IRA. And those dollars are growing. And I like that. You know, and if you think about your retirement account for any of you self-directed investors with a private fund, you typically don't want liquidity. You actually want the money to stay invested. Um, you can't touch it until you're 59 and a half, anyways. And so let that money stay and grow. I'm not caring necessarily about liquidity. So, but just keep in mind as we're talking about real estate, although you might have the benefits of cash flow and appreciation, whether it's a real estate fund or whether this is real estate you're directly owning as an asset, there is a difference liquidity between being invested in a real estate fund versus owning assets directly. All right, venture capital. Venture capital is a fun one, but when a lot of people think about venture capital, we're thinking about the startup company that is not yet profitable. Um, this is not private equity, by the way. Private equity, in the typical type of private equity, is more established companies that have proven themselves and are making money, that are trying to grow. Venture capital is more startup concept. They might have customers, but they don't have much revenue or they're losing money still. And but investors are putting the capital and money in because they believe in the growth opportunity and they want to supercharge that growth. Or it's a business that needs capital investment to get off the ground. Now, in exchange for that investment, the venture capital fund is going to take a share of the company. It's going to take stock for that. This is, of course, very popular in the technology space where venture capital, Silicon Valley, is funding many of the technology companies that have become unicorn companies, billion-dollar companies, from many of which we have on our phone today, from an Airbnb or a Stripe or whatever. I mean, we're using these companies, right? We probably have a social media account on one of these companies, and they were funded by venture capital. Well, you can participate as an investor in a venture capital fund. You could also invest directly into startup companies, which is called angel investing. And there's even angel investor funds where you might group up with other angel investors into specific companies. But I might just be a person who likes to invest in startups and I'll go network and meet people and I'll angel invest into specific individual companies. Or I could invest in a fund, which is investing in 10 different companies. Now, one of the things about venture capital, and I like this example, when we had our alt asset summit three years ago, we had Lisa Walker, she was president of Tech Coast Investors, an Angel Investor Group, and they're a venture investing group, they invest early stage and talked about investing in startups. And the basically you have a 90% chance of losing all of your money. It's like each company you invest in, and I was like, hold on. If I invest in 10 companies, the the statistics are that nine out of 10 of those will fail. And I've heard different statistics that are let's say it's seven. Okay, but just hang with me here. I'm just conceptually trying to get the point across. Let's say nine out of 10 companies fell in the venture space. Why would I do that? Because the one that makes it could be the unicorn that has a 100x or 1000x return that's gonna make up for all those losers that you lost all of your money in. And that is how venture investors think. They know that the typical outcome of an investment is gonna go to zero. Now, of course, they're never expecting that when they invest, but they understand the risk-adjusted returns. They understand the risk profile of venture as being very risky. That's why venture funds can kind of spread that risk. So if you're investing in a venture fund, you're kind of spreading that risk over. The fund will own, let's say, 10 or 20 companies. And so now, if I get one or two of those, that goes really well, all those returns make up for the losers that washed out. So venture investing has a lot more risk. It also has illiquidity, and then I can't get the money back. Um, and typically you could be tied up for past 10, 20 years, depending on the different opportunities of when the company within the fund does well, or maybe you've invested directly in a company that's an angel company, and you have the option to take money off the table. But a lot of smart venture investors, when they have a company that's doing well, they like to stay invested out through the long run rather than take the early money off when there's opportunity. Because usually the one that's doing well and making money is the one they want to stay connected to. But lots of different um perspectives on that. Uh okay, let's talk about buying small businesses. This has been popular as of late. The SBA even just recently updated their SBA lending guidelines where you can get an SBA loan now for up to $10 million. Old rules for SBA loans was the maximum SBA loan amount was $5 million. That was just increased to $10 million. That is a significant increase. And it's uh and the SBA uh loan opportunity is a big benefit to anyone wanting to go buy a small business because you can get a government-backed loan. The bank's protected on it, they're more interested in lending on business acquisitions because the SBA will back up 90% of the loan. Uh, but buying a small business, whether you're using an SBA loan or seller financing or creative finance or your cash or other net worth to acquire businesses has become very popular. Baby boomers are transitioning, they need to sell businesses, their kids don't want them. And so, and they don't have other, you know, succession plans in place. So there are opportunities to buy small businesses. At my law from KQS Lawyers, we're helping a client every other week buy or sell a small business. All right, it's very common right now, and it can be a great way to get into business ownership. Um, typically, I will say this this is not an investment. This is an investment and a job. All right. Usually, when you're buying a small business, you're gonna need to be heavily involved in that. A lot of people, I think, make the mistake of saying, well, I like to invest in small businesses, but I don't want to work in it. Small businesses don't have enough free cash flow for an investor to sit there doing nothing typically. You might have managers that are running things day to day, but in order for that small business, in my opinion, to be really successful, it takes the involvement and action, decision making, strategic relationships, growth, all those things that can make a business flourish if you're investing in a small business. So um, so it's got a little higher involvement. I would not call investing in a small business passive. All right, private equity. We'll stay in just this investing in private business category here in the middle. Um, private equity has been the highest performing asset class again in that last 10 year window, 2015 to 2025. Now, private equity firms and funds in general have been gobbed up because they haven't been able to sell companies. The typical private equity firm or private equity company, when When they go buy a business, is they get debt. They will get debt from a lender to fund, let's say, a third or 50% of that purchase price of the company. They're putting a loan on the company they're buying to buy the company. Okay. It's a pretty good deal, right? But that loan is based on interest rates and the prevailing market of what rates are. Well, as rates have gone up, these private equity firms have had their loan costs increase. That has decreased the value of companies. Similar to what many people in the real estate space have found, right? When interest rates went up, the price of their homes started going flat or went down a little bit because there's less people that can now afford this home. If interest rates go down, there's more people who can afford the home and they're willing to buy. Well, private equities had the same issue in that the cost of debt has gone up dramatically. That means other buyers of the business, other private equity firms, have to pay less because they got more cost of debt that they'll have to pay. The debt isn't as cheap anymore. So private equity is kind of in this issue of how do we hold these assets longer? They haven't been selling companies as quickly as they typically do. They generally want to hold a company three to five years. Now they might be holding them seven to 10. They're doing continuation vehicles and all these other structures. Despite that, however, private equity is still over again that 10-year window had the highest returns outside of Bitcoin. Pretty consistent, beating the stock market, which is why a lot of wealthy investors like to invest specifically into private equity. And sometimes people call that leverage buyouts or LBOs. But that's the private equity business. Again, great returns, passive in nature, not liquid, in fact, less liquid than it used to be even now, because the private equity firms have had a difficult time selling companies. But they have done continuation vehicles. There's a new market of secondaries where people can buy into existing funds that one investor is trying to get out of and they'll sell their interest. That's called a secondary. So there's like a there's there's development in that space on how to get liquidity. Now remember, click the link below. You can get the entire slide deck. All right, just click the link below. You can download the deck. Like I said, this is very comprehensive deck and uh compiled from a number of the other uh uh uh topics and speeches I've gave at the Alt Asset Summit and a lot of stuff that um Jared helped research for me. All right, let's talk about just like certain resources. Oil and gas, I'm putting precious metals in here, um, and even cryptocurrency because it doesn't, I don't know that it needs its own category, but um oil and gas performing incredibly well this last year, but last 10 years at 2% annual rate of return from 2015 to 2025, not so hot. Doing great right now, though, in 2026. So a lot of investment assets are very cyclical. All right. Real estate can be cyclical. We're gonna talk about that here in a second. The oil and gas space can be cyclical too. So you always have need to be buying at the right time in the cycle. Buy low, sell high, right? That's that's the but knowing what's the low and what's the high is the whole magic of that. And none of us have a crystal ball. But right now, of course, oil has been trading up. So if you bought low last year or before, uh, as prices have been low the last few years, um, you're happy to see oil and gas doing well. So it's it looks like we're gonna have a great year for 2026. Cryptocurrency, flat. Uh, I give my opinions on cryptocurrency. It's the new digital gold, yada yada. Precious metals had an incredible year last year. Um, a lot of people's pitch on precious metals right now has been um the US's, I would say, um, what's the right way to say this? Interference in the world in Venezuela and in uh Iran has caused many other nations to not want to hold U.S. treasuries. So what have they done instead? They're holding gold. And they're getting out of U.S. assets or U.S. treasuries, which a lot of foreign governments typically used to hold or other foreign institutions or banks, and many of them are now instead holding gold. That has been one of the reasons that gold has shot up in value over the last few years. So, um, but what does that future look like? What does that cycle look like? Where are we at in that? Is that something that's gonna continue or is it something that's gonna fall off a cliff? Um, uh, who really knows? But you all have to have your own perspective on this. My point here is not to tell you what to invest in. I'm just trying to summarize the different options and all the things out there to learn and get interested in. So many Americans have built up hundreds of thousands of dollars that they could invest. It's sitting in their investment account, it's in their IRA or 401k, and the only thing they know is stocks and mutual funds, and they don't even know much about it and don't even like it. There are so many different ways, though, that you can invest and grow money. Do not get constricted to a small menu of 3,800 companies or repackaging of those same 3,800 companies into combo mills. This is the menual concept I'm sticking with here, okay? There are stuff that's off the one menu of the stock market that you can actually invest in to grow and build your wealth, but it's not as easy. It's not just like typing in a ticker to go and buy this, these publicly trade assets. These are things you got to get interested in, whether it's the real estate property you're gonna go to, the private equity fund people you're gonna talk to, the startup or the small business you're gonna learn about. I mean, these are things you need to learn about and get educated about and have a conviction and an opinion on about how you want to grow and build your wealth. Okay, let me hit real estate now for a second. We've and we've hit a number of things. I'm gonna skip the first slide on the deck, but um, the one thing I want to say about real estate is it is also cyclical. And and I just see this every day at our company at directed IRA, it was real estate has been the number one asset people invest in with a self-directed IRA at my law firm, KQS lawyers, where we're helping investors, many real estate investors across the country and have for 20 plus years. Real estate investors are not making a lot of money right now. Some of them are, but it's a lot less than what it's been in the past. We have had decreasing returns, and you can see that in 2025. We had the lowest annual return, and this is on property values, and just in, I should say, in real estate in general. Again, this is a general category. In 2025, we had the lowest returns we've had in the last 10 years. Remember 2021, though, when any idiot who got into real estate made money, and you're like, my dumb brother-in-law, Eva, made money in real estate that year, not because he was smart, just because that happened to be the year he did a real estate deal. Well, that era is gone. All right, and as you can see, it started going back down to some normal levels in 2022, 23, 24, and then it just dropped in 2025. Now, this that happened as rates started shifting again. We started having inflation, and uh the Fed had to go rise interest rates to get inflation under control. And again, interest rates are a big predictor of how uh what people can afford in the real estate market. And that in fact drove post prices down. Also, the cost of build, again, another inflation driver. The cost of build has gone up significantly. So it's not like you can just go build the home then for cheaper. If someone doesn't want to sell their home because they got such a great rate, well, I'll just build one for cheaper. That's not necessarily the case either. That's working in some markets, but even home builders are struggling and not necessarily growing in the amount of homes that they're building. So uh we'll see what is the next cycle for real estate. A lot of people have opinions about that. Um, I'll just say from from my perspective, it seems like it's gonna be pretty flat, in my opinion, in the residential space. Obviously, there are hundreds of different real estate markets you could invest into and different asset classes within real estate in all of those markets. Um, multifamily has been under pressure as well. It's the same story with interest rate exposure and rates going high and people that bought multifamily being distressed and having to sell. We've had many webinars on that at directed IRA. Um, but what is the asset class you're interested in? Maybe it is like office, maybe it's storage, maybe it's a particular market for residential single-family properties. Maybe you have a conviction or strategy on multifamily and getting distressed properties. All right, there's obviously ways to make money and outperform, but I'm just getting averages here. The reason I like thinking about the averages is it shows you the wave that you can ride, right? There's something happening in each asset class in a particular year or over a window where you can see the general consensus of this asset class is it's doing well. If I took private equity or you took real estate, you can just look in general, which one outperformed. And again, the last 10-year window, private equity would have outperformed. If you took 2021 by itself, real estate could have outperformed. Although I think private equity did well that year too. So uh, but maybe you're someone that likes real estate, understand real estate, can have deals, deal flow, an opportunity. You want to network in real estate, you want to learn about it. That's probably a place you'll have more success than analyzing Excel spreadsheets and trying to understand private equity deals that you're just not excited about. Maybe you like small business, maybe you like startups. Those are places I go find conviction and try to learn and get educated. There's lots of places in each of these areas where you can go learn and get connected with other people. All right, private funds in real estate. I just have some analysis there. Obviously, one way to invest in real estate and stay passive is to just invest in private real estate funds. There's some numbers here of just 10-year annual returns based on different real estate funds. They're kind of averaging on an annual basis, around 8 to 10%. You can see there in the numbers. There's a lot of the big um private real estate funds that do report your numbers. A lot of real estate funds are small, though, and private. We see many people's IRAs investing into those. I've invested in some of those with my personal funds and IRA. Um, but here I just have some good data on what returns have looked like over the last 10 years. All right, lending on real estate. Uh again, something I do quite a bit. A very common strategy is if I don't want to own the real estate, like I don't want to own the rental property and deal with the tenants and toilets type stuff, I could invest into real estate by being the lender. Now, if I lend money on real estate, I have, let's say, a one-year loan, and I typically lend at 12% interest in two points. So I'm getting 12% annually on my money plus 2%. I'm getting like a 14% total annual rate of return. That's going and building up, growing my investment portfolio for me to go reinvest. I typically do that with my self-directed retirement account. Uh, but the private lending rates you can see actually have not shifted too much. Um, this is data from the last, again, 10-year window showing even in that window where we had really low interest rates, private lenders in 2021, when rates were really low, private lenders were at least getting 8.5%. But one thing I think that is interesting here is that in 2021, a lot of people making money on real estate, remember? Um, it's interesting to see that at that time in that heyday, rates were low. Well, it's likely because banks had such low rates of what the banks would lend at. So the private lenders typically have a premium over whatever bank lending is at the time, um, but rates were so low at that point. So now I don't know, every market's different, of course, but this is showing you an average private lending rate here, I'd say over the last 10 years, is around 10%, it looks like, if we if we average that out over 10 years. Now, when you're lending on real estate, you should be getting a mortgage or deed of trust on the property. If you're lending to individual investors, you should know them. You don't want to be lending on someone's first property, right? You want someone to have experience and some type of track record. Do they have income or other assets? Uh, you want to learn about them. So even though you that you are a private lender, you need to be lending like the bank would because the bank goes through all those considerations because they need to get paid back and people lose their job if they make dumb loans. Well, you lose your money if you make dumb loans. So it's the same thing here. You want to be, of course, underwriting those, understanding the property. How are they going to pay you back, making sure that you're secured on the property now? Now, one of the downsides to private lending is you never hit a home run. If I'm investing in rental real estate, I could hit a great year where we get a 20% rate of return. Like we go back to here, 2021, my property went up 18%. I didn't control anything. The market just went up and I got a great return. My my house that I bought for 500 grand is now worth 600 grand after that year. I I did jack shit. I didn't do anything. But my house went up 100 grand. And maybe I only put 50 into it to buy that property in the first place. I've tripled my money. I've I have a hundred, not 100,000 of equity, and I only put 50 grand in. On the other hand, when you're private lending on real estate, if I'm getting a 10% return, that's the maximum amount I'll ever make. So that's like a base hit, a double maybe, but I never get a home run. So I would say that probably the downside on private lending. Again, it's easier, it's simpler. You get to play the role of the bank. Your money can compound, but you need to make sure you're not losing money because you don't have home runs making up for it. Right. So you want to be careful on how you're lending. Again, go through the typical process. Think what would the bank do? Underwrite your loans that way. Make sure you're getting security. If you're lending on real estate, get a lien or mortgage on the property and use your title rescue company or closing attorney to make sure that you understand whether that's in first position or second position or how that's getting done. All right, private companies. I talked about these already. Um, we talked about buying the small business again. The news on SBA loans going up from 5 million to 10 million is pretty cool. Uh, private equity has been the winner in terms of overall returns for the last 10 years, only after Bitcoin. And then venture capital and stars, super interesting place, especially if you're in technology or other biotech or any of those areas that have a lot of startups that could turn into the unicorn type companies. Um, that may be an interesting place uh for you to go. I will say, just even at directed IRA, I've seen a lot of people use their IRAs to invest in stuff that they know. I remember a group of dentists who are investing in like this new mouth guard company. It was a company that had some concept for mouth guards. I don't remember the name of it. I just remember seeing a handful of dentists using their IRAs to invest in this company that was in more startup mode, raising capital, a venture type company. They were investing essentially as early angel investors in that company. But they invested because they understood that product. They were the ones selling that in their dental practices to their patients. And so they decided I want to invest in this company because I understand uh what it's doing and the value it can have to the patients and the people who might need it. So think of whatever you do. What do you know about? And what are the companies and products there? What's your network doing? I guarantee you it was probably some dentist in their group that was like, I could do a better mouth guard in this crap that we're selling all day. And they went out and figured it out how to do it. All right, let's contrast private equity versus versus venture capital here over the last 10 and five years. So we look at this next graph there. In the black, you can see um, I shouldn't say five years, you can see the 2025 returns. In the blue, you can see the 10-year returns. Now, venture capital is going to be firms like Sequoia, Andreessen Horowist, Horowitz, Horowitz, First Round Capital. Those are all on the lower end there. And and these are again, just we're trying to get representative numbers here. Those are some of the best VC company firms out there, by the way. These are like some of the best performing venture capital brand names out there and have had really good numbers over a 10-year window. You take uh the other ones, though, these are like Tiger Globe or Insight Partners General Class, those are what are called growth equity firms. If a company kind of does well in venture and is growing, they might go from a VC investor type money to getting growth equity in money. And there's opportunities to invest in growth equity firms. And they're typically investing the company once it's profitable, once it's proven itself. Now we're gonna maybe put in more serious management or experienced people. It's not that crazy technology founder that has no idea how to manage people or scale an organization, but they understood how to build a cool product that people want. So, so a lot of those growth equity companies may also be uh investing, but they're usually a little bit later on in the um uh in the investment cycle. All right, buying a small business. I kind of gave my commentary on that again. You to make sure you understand you're gonna be heavily involved in this. This is not a passive investment. I love the news from the SBA on $10 million for new SBA loans buying a business up from $5 million. All right, let's talk about cryptocurrency here. And then I want to take your questions. So, and also what's your favorite alternative asset? Like, what is your favorite alternative asset to invest in besides something in the stock market? If there's a stock you love, you can drop it in the comments. But I want to know, let's give me some. I want to hear some something that's getting mentioned here. Tell me something you love investing in or have had success investing in. Um, but drop one of your what drop a note in the comments so we know uh what you like to invest in. Otherwise, it's just the match show. I'm just gonna tell you what I think. All right, cryptocurrency. Um let's let's look at these returns. I think it's been interesting to guys. We kind of are going through this, zooming out for a 10-year window on perspective on this. The the numbers here are really big. You usually will see single digit or two-digit returns, right? 5%, 12%. Like that's a good number, a 12% annual return. And this is just Bitcoin, uh, obviously the most popular uh cryptocurrency, but most of these numbers are in the 100 plus annual rate of return. And in 2017, 1369% return on cryptocurrency. That was actually the first year I bought um Bitcoin and I had my video on how I did it with my own self-directed retirement account. Even uh, it's a bad video, it's on my YouTube channel back from 2017. Maybe we'll drop a link in it just for fun. Uh, but if you watch it, just forgive me. I was trying, it was 2017. I was really early to YouTube back then. Uh, but it I break down, I think, pretty well on what to do back then. Now it's so much easier, by the way. Right? You can we have a crypto IRA product, it's so much easier. And a lot of clients have loved buying crypto in a Roth. Now, why did I shoot that video back in 2017? There's why. It's right there on the graph. 1,369% return. I had so many clients asking me, Matt, can I buy Bitcoin with my Roth IRA? I was like, I don't even know what Bitcoin is back then. It was not like people did not talk about it. It was like technology people that were talking about it. That was pretty much it. And so I had enough clients ask me, I'm like, I better figure this out. That's what I did. I went and figured it out. How can you buy crypto with a retirement account? Is it a qualifying asset? Yes, it is, because basically a retirement account can own any asset that's an investment so long as it's not disallowed. And crypto was a new creation, so it wasn't even the code, so it wasn't disallowed. So yeah, you could buy it. Now I had a lot of those early clients buy it. I look like a genius helping them, right? And I met some of them at my conferences too, who've been, oh my gosh. Like I've met many of them who have 10 million plus in Roth diaries. I met a guy too. He's like, I did it myself and my daughter. We both did it. Um, he's at my self directed diary conference couple. Years ago. He's like that. Both accounts are 10 million plus. We invested 100 grand or so. And they're one of these early, early people investing this again with a Roth account. Now, crypto's been on a ride. All right. There are years where it's gone down 73%. And 73% off of 1,369% doesn't sound like a lot. But when your portfolio in crypto was $100,000 and it went down 73%, and now it's worth $27,000. You're like, ooh, I should sell, right? Um, well, if you did, the next year you would have made it all back up, and the next year you would have tripled your money. So um who knows? I I'm like very cautious into cryptocurrency, despite how exciting some of these numbers could look on the graph. Um, so take a measured approach on this, I would say. Uh obviously, you're not be investing all of your dollars into Bitcoin or cryptocurrency in general. Uh, but there's a reason it's been a very popular alternative asset. People are believing in it, they're staying in it, it's getting more institutionalized. This is a worldwide type market for it. This is not just something in the US. Uh, so we'll see how that goes. Definitely the the newest um investment asset period out there. Okay. Um, we talked a little bit about precious metals already and kind of the gold, it's had that we had the year of gold last year. Silver did really well too. I think silver actually did better, but precious metals definitely had its year last year. Now, when it comes to investing, there's a things, a couple things you want to bring together. One is do I know the full type of things that I can invest into? Like if you don't know every asset that's possible, you're limiting your returns of what you can get. Because as I think about investing my money, having my money compound and grow for me so that my assets are working for me, that my ass isn't working for me every day. How do I do that? Well, the best way I do that is by becoming knowledgeable and understanding the different asset options that are out there. If you're just restricting yourself to the stock market, you're gonna have a very narrow view and you're gonna limit your opportunities to truly grow and build wealth. As we saw earlier in the charts, ultra-high net worth investors, a majority of their assets are in alternative assets. They do not have a majority in the stock market. So if you're someone that's highly over-allocated to the stock market, I want you to think about what else you should be investing into. What are you interested in? What do you have conviction about? What do you think will grow? Maybe you need an advisor to help you through that. I'm not here to be your financial advisor, I'm not one. I'm just here to give you ideas and education and training to think about. Once you know what assets you want to invest in, and that changes over time, your perspectives change, the world changes, right? The economy changes, the all the macro environments change, the micro environments changes, your retirement horizon might be sooner or later. A lot of things change. So you're reanalyzing this all the time. But get a good understanding of these different assets so you can be flexible. You can have better options and opportunities to go and build your wealth. The second part to that is utilizing the right accounts to get there, right? Do I have a 401k at work? Am I taking advantage of the match that's free money? Do I have a Roth IRA? I'm a high income earner. I can't do a Roth IRA. Are you doing a backdoor Roth IRA? Do you use a health savings account in your situation? When should you pay down debt versus invest in a rental property or buy a small business? I cover all of this in my ideal order of investing guide, which you can download. It's in the link below as well. But I have an entire guide that breaks this down when to use all these different accounts. I know people get overwhelmed. They hear about a 529 plan for their college savings accounts. They hear about a Roth IRA, they hear about their 401k, they're doing X and they're doing Y, but they're not doing multiple things. What can you do? Well, there's a lot of things that you can do. But what should you do next? This ideal order investing. I break down what to worry about of what you should do next. Don't worry about everything. You'll overwhelm yourself. But what should you worry about next? All right. Do we have time for questions?

SPEAKER_00 48:30

Who's got questions? We've got a couple of questions live. They're a little off topic, but okay. We do have a couple. All right. If they're here, let's hit them. We've got Arthur 4531, and he asked, at what dollar value do domestic asset protection trusts or irrevocable trusts make sense for asset protection?

SPEAKER_01 48:47

Ooh, great question. Um, domestic asset protection trust, by the way, for everyone else that doesn't know, is a trust that you can have, and multiple states have them. Utah, Nevada. I think there's about 10 or 12 states now that have these domestic asset protection trusts. Let's throw that into the chat there, see what states have adapt domestic asset protection trust. If you're a resident in one of those states, I would do adapt even a million bucks. Um, and I would definitely do it at 5 million or more. But if you have at least a million dollars of assets, I would, it's it should be on the list of what you should do uh or use. If you're 5 million or more, I would seriously consider it and I would recommend it in your situation. Again, it's not available in every state, but I know uh just because we're more on the West Coast, we're helping clients across the country, but um definitely have set them up for clients in Nevada and in Utah. And if you're resident in those states, you can have adapt. What the adapt is, is when you put assets into this trust, a creditor can't get to them. All right. This is a when people say, oh, put your assets in a trust or use this international trust or these constitutional trusts, those are all bullshit. All right, those trusts are nonsense. Do not waste your time with them. Uh, but what trusts are reality are these DAPs, domestic asset protection trusts. So I definitely look into them. Um, we do them in our law firm, KQS Lawyers as well. So uh look into it. Um, sometimes they'll be in states where we we don't do those. We'll do revocable living trusts and all your general trusts in any state. And by the way, there is a state planning special at KQS Lawyers. Go to KQSlawyers.com if you want to get your state plan done. Great Father's Day present. All right. Today's Wealth Office Hours Lives is brought to you by KQS Lawyers and Directed IRA, of course, where if you want to buy alternative assets, what we're talking about here with your IRA, you can do it with your self-directed IRA. If you haven't, by the way, if you don't know what that is, I have a lot of content on my YouTube channel. There's definitely links below too on how to book a call with my team, but we can walk you through how your IRA can invest in these alternative assets we talked about. You might be someone that has 600 grand and it's all in the stock market. Well, you can peel 100 grand off to invest an alternative asset, 200 grand, 50 grand, whatever it is. All right. You can you don't have to fully be invested in the stock market. You could put the whole thing into alternative assets if you want. So you have a lot of options there. We're not here to advise you, but we're here to let you know what the options are. Well, you know the different assets you want to invest in, whether that's a rental property, a real estate deal, a private fund, crypto, whatever it is, we can help you do that with a self-directed IRA. Because your IRA at Fidelity or Vanguard, they're gonna just let you buy what they sell, more stocks, bonds, and mutual funds or ETFs. But if you want to invest in an alternative asset, what we've talked about with your retirement account, you'll need a self-directed IRA. And that's what our company directed IRA does. All right. Who else? We got another question five?

SPEAKER_00 51:58

Yep. From the Chowdery Sisters 501. So I max out my 401k from my job and also contribute 7,500 into a Roth IRA. Can I still do a mega backdoor Roth and get 72K?

SPEAKER_01 52:12

Yes. Great question. And I and I would do it in that exact order how you did it. You're like right on on how you should do it. Some people will be like, should I do a backdoor Roth right out of the gate? A mega backdoor Roth right out of the gate. I'm like, have you maxed out your 401k contributions yet? Have you done a backdoor Roth IRA? Those things are much easier to accomplish. Do those first once you have. And by the way, that because you can put $23,500 in for 2026. Actually, is it $2405, $235?

SPEAKER_00 52:45

24-5.

SPEAKER_01 52:46

24-5 for 2026. That didn't sound right to me. Okay, $24,500. If you're $50 plus, you get to do an extra $8,000 in your 401k. And then your employer's doing a match, right? So let's say you have $25 to $30,000 that you've put into your 401k. You put another $7,500 into a backdoor Roth IRA. All right. So now we're up to you know $35,000 approximately here. And you're like, I want to do more. I want to put more money away. How do I do that? Well, that would be the mega backdoor Roth, which you do through your $401. So this works in two scenarios. One, you're an employee at a company that has a company 401k plan that allows for after-tax employee contributions. Now, there's survey results out there I've seen on this. More than 60% of 401k plans in the US allow participants to do after-tax employee contributions. That is the gateway to this backdoor Roth IRA. It's mega backdoor Roth IRA, by the way. This is different than a Roth IRA. This is a mega backdoor Roth 401k that ends up in an IRA. I know it's confusing, but um so but what you can do in that is you can get up to 72 grand into the 401k. So if I have 35K in there already, I got another 37,000 that I could put into the 401k of these after-tax. Actually, sorry, you would have had 7,500 in the Roth IRA. So let's say you had 25K in the 401k already. Well, you have the difference from 25,000 up to 72, 47,000, I think, that you could do after-tax employee contribution and actually roll it out to a Roth, even though you still work there. A lot of people are like, well, Matt, I I can't thought I can't move money out of a 401k when I still work there. There's an exception for after-tax employee contribution. You can actually roll those out and they can be received into a Roth IRA. No Roth conversion required because they're after-tax employee dollars in a 401k that you never got a deduction on. Voila, that's the mega backdoor Roth 41K. Now, I've got videos on that. That was a very quick breakdown. But to answer the question, absolutely yes, you can do that. One caveat, make sure your employer 401k allows for it. One snag, I would say, is if you are the business owner, you cannot do this. If you're an officer, director, or 2% or more shareholder in the company, like on the corporate documents, officer, shareholder, or 2% or more shareholder, you can't do that. Um so you might need a little more guidance if you're in that boat. It's likely that you won't be able to do it. But if you work for a company, even if you're an executive high-income earner there, this could be an option for you. Or if you're a solo 401k, you have your own 401k with no other employees, you'd be able to do it as well. All right. Any other live questions?

SPEAKER_00 55:46

We do have one more live question from why not you. It sounds like they're trying to um they're they're thinking about how to get around some rules. Um, it's I am building a spec house. Can I sell an option appraised at fair market value to my sister's Roth IRA, where a trust for my adult children and other sister are beneficiaries? She is childless. No. Okay.

SPEAKER_01 56:14

So this is a self-directed IRA question, which you can use an IRA to do real estate options or to buy real estate, sell it for a profit. You cannot engineer transactions like that, though. Okay. Um, even though your sibling, brother and sister, are not what's called a disqualified person, and your IRA can actually buy or sell real estate with them or options on real estate. If the transaction is, and I'm not saying this is what they're happening there, but I sense that they're trying to engineer some deal that will get value to the sister unfairly, um, or somehow get it to the kids of the sister, or sorry, to the kids of the individual here we're talking about through the sister's Roth IRA. Um, the IRS is not it, it cannot be a manufactured transaction, is what I'd say. So, yes, could you cut a deal? There better be economic realities between what that option was worth and your sister doing with the Roth. Sounds to me like it's not because it's being engineered between you guys, and the concept here is to get it to your own daughters. So, one of the rules with IRAs, self-directed IRAs, if you lost me on that and you're like, I don't know what he's talking about, this is a self-directed IRA thing. There's one big rule when you're using your IRA to buy real estate or doing self-directing, which is your IRA can't transact with yourself. So, like if I want to buy real estate with my IRA, I can buy the rental property on 123 Green Street, but I can't that some other person just owns. I don't know who it is. It's just a good property. I want to buy it. But I can't sell real estate already owned to my IRA. And I can't use my IRA to buy real estate from my dad or my kids or my spouse. The IRS is like retirement accounts or tax advantaged accounts. We're not going to let you transact it with just anybody. So you can transact it with third parties, but you can't transact it with yourself or your spouse, your kids, or your parents, because we don't trust you. We think you'll manipulate the transaction to avoid taxes unfairly. Well, that's kind of what this question is getting at is how do I get around the rules to get the same outcome? And the problem there with the sister, even though not a disqualified person, I would think you're going to have problems in that transaction where there could be something called self-dealing, or the IRS would clans collapse the transaction to say this really ended up in your kids' accounts, maybe inherited Roth IRAs at the end of the day. The sister was just here as some kind of step in the middle, and they'd call it a step transaction. So a little nerdy, quite a tricky question, actually, but um great question. Um, and thanks for everybody for being on. I don't know if we have any other buddy live. I'll take one more live question if anybody had one that was good. We have if you don't like it, Jared, you can just, you know.

SPEAKER_00 59:04

Well, we have one. What's your favorite alternative asset?

SPEAKER_01 59:07

Oh, what did we get votes on? I'll I will say, I will say my favorite alternate, just this is investor Matt here for a second. I'm I'm a little contrarian. Okay. My favorite alternative asset changes. Um, and that's why I like learning and knowing about all alternative assets. I was pretty high on crypto. Of course, you saw I bought it some in 2017. I didn't buy it exactly when it was at the low in 2017, so I didn't get the full 1003, but I got a pretty good return on that. Okay. You can see in the video, BTC was 2,500 bucks per BTC when I bought it. Um, so so I like crypto, but I it's not the cycle I think where I want to buy it. So I invest in cycles. I'm back in looking at real estate deals personally right now. Um, I've invested in a lot of private equity. Um, I've invested in some multifamily real estate, opportunistic distress stuff. Um, but right now I'm looking at other real estate uh areas that are in distress, like office, because I think there is value plays there where you can buy at significant discounts to what you can build. It is under supply, it has gotten a bad wrap, and because of that, prices are low. So again, there are some assets that are just cyclical in nature. And so if you can buy at the right time, you have the ability to make money. And of course, a lot of people say, particularly in real estate, which is known as a cyclical asset, you make money on the buy, you realize that wealth on the sell of the property, but you truly make it when you buy. So I would say commercial office real estate. And I know most people are like, Matt, that's the worst thing you could do right now. I'm just saying, if you can find the distress stuff, there's some deals to be had, and you will look like a genius, maybe in five to ten years. It's not something you'll make money on in next year, two or three years, but in five to ten, you could look like a genius. All right, what did we get votes on though? What did people like? Got some crypto, real estate. Um I like crypto. I'm not selling my crypto, by the way. I'm just not increasing my position on it.

SPEAKER_00 1:01:22

Got some real estate, um, just different types of real estate, RV park. Okay, RV parks. I've actually invested in an RV park too. Um yeah, a lot of a lot of real estate. I think real estate was definitely the winner. Okay. All right.

SPEAKER_01 1:01:38

Well, you know what they say about real estate, it's not going anywhere. So um, that was a joke. That was a joke, guys. No, no, I've done that one. Do you get it now?

unknown 1:01:52

It took me a while.

SPEAKER_00 1:01:53

We were talking about RVs, and our RVs do go somewhere.

SPEAKER_01 1:01:56

Yeah, that's true. It's a thinker, you know, it's a thinker. Um, thank you everybody for tuning in. Of course, we do Wealth Office Hours Live every Thursday at 4 o'clock Pacific time. Make sure you're subscribed to the channel. Like, if you're not subscribed and still watching right now, will you subscribe already? Just subscribe to the channel. Okay, it's not that bad. I won't bug you too much. We do a couple videos a week. We do one live, uh, a lot of tax tips, how to protect your assets, save um uh save on taxes, grow and build your wealth. So please get subscribed. We'll see you next time. Thanks to everyone.