Opinion

Exploring investment alternatives | Wealth Management

Stephen Jackson is with Kirkland Wealth Management. - contributed photo
Stephen Jackson is with Kirkland Wealth Management.
— image credit: contributed photo

Investing isn't limited solely to stocks, bonds and cash. For many Americans, real estate is their largest investment - usually their family home. But there are other ways to invest in real estate, too.

Often, some of the best real estate investments may be those you make on your own, such as purchasing your own home, vacation properties or investment properties ranging from vacant land to apartment buildings and office buildings. Real estate investments are also available through the financial markets. These include real estate investment trusts (REITs) and partnership investments ranging from small "private placements" to larger nationally syndicated and publicly traded partnerships. The era of the real estate tax shelter ended in the mid-1980s, but some of the current partnerships provide some tax-shelter elements. More important today, though, is an evaluation of a project's potential for financial success and its liquidity. If you invest in a partnership, be prepared for the additional delay and complication that a partnership Schedule K-1 may add to your own tax return.

Other Investments

Many other investment opportunities exist. These include complex and often very risky instruments such as futures and options; precious metals; and art, antiques and collectibles of all kinds such as, coins and jewelry. In general, these investments carry far greater risk than typical stock and bond portfolios, are less liquid and may require larger transaction costs to buy and sell.

Reliable information regarding these types of investments may also be more difficult to obtain. In some cases, you can acquire publicly traded stocks that will, to some extent, track the appreciation of such items - for instance, stock in a mining company.

At one time, conventional investment portfolio theory dictated that you maintain a small portion of your portfolio in gold or related investments. This is no longer common wisdom. Given these negative aspects, it is also important to point out that many individuals have enjoyed spectacular investment returns from these types of investments. This may often be particularly true for individuals who have more knowledge of certain asset types than the general public. And, of course, for some people these types of investment represent a hobby in which earning money is secondary to their enjoyment.

One way to think of your investment portfolio is as a pyramid. The base is made up of safe, secure holdings such as bank accounts and personal real estate, with each successive tier representing a smaller, more risky, and potentially higher-returning part of your investment mix. As always, we are available to help you make the asset allocation decisions for your individual situation.

Stephen Jackson is with Kirkland Wealth Management. He can be reached at 425-576-4035 or Sjackson@ifgrr.com.

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