As human beings, we are prideful by nature (as my wife often reminds me). We take pride in our own strength and knowledge and hate being told what to do or taking advice from others. I guess it’s that primordial urge in all of us to be the alpha in all things. The problem is that pride can also get us into trouble and prevent us from achieving our highest potential.
Here’s a simple example. How many neighbors have you watched spend hours, days, and weeks trying to fix something on their car they could have just taken to a mechanic to fix in a couple of days. They refused to spend the money to have an expert fix it. They don’t trust mechanics; they tell you. They preferred to fix it by trial and error from YouTube. At some point – probably at the urging of their better half – they give in and finally decide to take it into the shop, but only after wasting countless hours and dollars when they could have relied on an expert from the start to save themselves a lot of heartaches.
When it comes to investing, many investors insist on doing it themselves. They attend seminars, buy books, pay for“platinum” memberships – all with the intent to do it themselves. Like the prideful neighbor, they end up spending a lot of time and money-spinning their wheels.
In the world of investing, here’s a little secret the wealthy have been relying on for years to build and maintain their wealth: partnering is the greatest form of leverage. One of the definitions of leverage in the dictionary is to use(something) to maximum advantage. To leverage something is to use something to gain an advantage. For investors seeking an advantage in investing, there is no greater source than partnering with credible experts.
Remember that neighbor who refused to hire a mechanic because he didn’t trust mechanics? There was a simple solution to that. He could have asked family, friends, or neighbors to recommend a reliable mechanic. We all know one. He could have also done his own due diligence – searching Google and Yelp reviews for guidance.
The world of investing is no different. Don’t prevent yourself from partnering with an expert because you don’t trust them in general. You can mitigate the risks of partnering by performing your own due diligence. Check their social media profiles. See what their circle of influence is saying about them. Most important of all, look at their track record.
Once you’ve become comfortable with the idea of working with partners, the question then becomes why you should leverage the expertise of partners.
In the world of alternatives – especially in the segments involving hard assets – leveraging others’ expertise is invaluable. Leveraging allows you to clear investment hurdles that are nearly impossible to do on your own.
Here are the major hurdles partnering with the right experts can help you to overcome:
Unlike public investments, where you can invest in as little as one share in a company, investing in real assets requires significant capital commitments – commitments typically difficult for one person to meet on their own. Even if an investor can meet the capital requirements for an investment, they are typically limiting their portfolio to that one investment.
Putting all your eggs in one basket is risky. Why not pool your capital with other investors through syndications or private investments to spread your capital across multiple investments, thereby diversifying your portfolio and income streams. Partnering with experts through syndications and private investments allows you to overcome the significant capital requirements of investing in commercial-grade real assets while permitting you to diversify your capital across multiple funds and asset segments.
Asset Segment Expertise & Knowledge
Investors are typically jacks of all trades but masters of none. They’re familiar with multiple asset segments but really not an expert in any one of them. To become an expert would require a substantial commitment of time, energy, and resources.
Teaming with an expert who has intimate knowledge of a particular asset segment and with a solid track record eliminates the time, energy, and resources required to acquire that knowledge on your own. Why spend years learning about the mobile home park industry when you can team with an expert who already has the track record and expertise in that particular area? Partnering with an expert allows you to clear the asset knowledge hurdle – freeing up your time to pursue other endeavors.
It’s hard to put a value on having boots on the ground in a particular geographic region. Experts with boots on the ground are familiar with the region’s demographics, trends, and underlying economic fundamentals that give them an edge on investors from outside the region. Experts with local knowledge, expertise, and connections are also privy to off-market opportunities the general public does not have access to. Leveraging the expertise of partners allows you to diversify outside your home market.
Why the Right Partners Makes Sense:
Warren Buffett is a prime example of someone getting wealthy by leveraging the expertise of others. Buffett has no expertise in designing, manufacturing, or marketing smartphones, but he has billions invested in Apple. He couldn’t make a soft drink on his own, but he’s a major investor in Coca-Cola. And, I doubt he ever lived in a mobile home but he purchased Clayton Manufacturing (and now owns about half of the mobile home manufacturing industry).
Warren Buffet has made billions by leveraging the expertise of others. Partnering is the great equalizer in the investment game. It allows you to invest in assets and markets you could never dream of doing on your own – without coming up with all the capital on your own.
By partnering with experts through syndications or private investments and in asset classes and geographic locations you do not have first-hand knowledge of, you can accomplish two goals of, 1) maximizing investment efficiency and return, and, 2) maximizing diversification.
By partnering with experts, you can supercharge your portfolio’s growth – far quicker than attempting to do it independently. And partnering with an expert with multiple skillsets, including in the fields of investing, business, municipal government, and law, only enhance your chances of success.