Capitalist Investor

3 Exclusive Investment Strategies You Won’t Hear About on CNBC, Ep. 332

• Strategic Wealth Partners

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In this episode of The Capitalist Investor, we reveal three powerful investment strategies used by top-tier financial planning firms to help build diversified, long-term wealth—beyond stocks and bonds.

These are not your typical 401(k) options. We break down:

How private credit can deliver treasury-like risk with higher yield

Why private real estate (not your average REITs) can provide steady income and long-term stability

The power of private equity and how it can scale businesses behind the scenes

Whether you’re a high-net-worth investor or looking to build smarter retirement strategies, this episode covers what most advisors don’t tell you—because they can’t offer these investments.

📧 Got questions or topic ideas? Email us: info@SWPConnect.com


#PrivateEquity #PrivateCredit #AlternativeInvestments #WealthStrategy #FinancialPlanning

And today's capitalist investor, we are going to talk about three investment opportunities that you'll only hear from high end financial planning firms. These aren't your average 401 K picks. We are going to talk about three strategic investments used by top tier advisors that help build serious and diversified wealth. All right. Hey, Tony, how are we doing today? Good, man. How are you doing now? You know, can't complain. All right, all right. Just watching the, tariffs on Switzerland. It's coming down to the wire. Yeah, I didn't I don't know why. I don't know how they got in Trump's back races or crosshairs, but somebody seems to every week. Yeah it just happens to be Switzerland. But anyway all right man we're going to talk about some investment opportunities that that most people don't have access to if you're kind of doing it on your own, your these are investments that are meant for firms that have, you know, a lot of money under management, you know, typically maybe a billion or more under management and because of because of the asset size of a particular financial planning firm, they have they get access to bigger and, you know, exclusive funds that don't even trade on the stock market. So we're going to talk about those because when it comes to building a, you know, a prudent investment plan in retirement plan, more diversification outside of stocks and bonds is really what it is, because at the end of the day, we want to limit volatility. And the more non associated asset classes that you have is going to help accelerate actually your investment strategy. Because I've always said I'm like hey, if your accounts down 10%, you got to get maybe a 12 or 13 to get back to even. But if you're down 30%, you need like 45 to get back to even, right? Or maybe even 50% right. So you don't want to crawl out of these holes. It's easy to it's easy to get back 10 or 12%, not 50. So we're going to talk about some, some investments that are that help with diversification and again, and they're, they're outside of the standard stocks, bonds and mutual funds. So the first one we're going to talk about is private credit. And the way I would describe this is, you know, this is how my, our investment team, talks about it is, you know, they, they have a strategy and target income and capital appreciation by primarily investing in privately orientated and negotiated senior secured loans. In US companies, investments are primarily focused on the middle market. Of companies that have revenues between 100 million and 1 billion. So let's put that in English. All right. Essentially what private credit is there are firms are not firms, but there are companies out there usually non publicly traded companies. And it could be traded traded public companies. But they might I'm going to use a crazy analogy. So let's say Microsoft you know I'm sure they got War Chest. They got money sitting around all this stuff. But let's say they wanted to build a new headquarters and they needed, I don't know, $5 billion. And going to JP Morgan, like, it's going to be very hard for them to secure that type of loan. And again, I'm using crazy numbers just to kind of give you an analogy. So what a private credit fund would do is they're going to start pulling investors money. So they're going to take my money. Derek's money. Our engineer Chris is money over here. Hundreds and hundreds of people. They're going to take our money and they're going to put it out to other companies that need to invest in money that can't get secured loans from banks, because either the bank, maybe they're already kind of levered up, maybe they're, the banks just don't have the money to lend, whatever that may be. So they take our money and give it to this company. But because it's outside of a bank, they charge a higher interest rate. Okay. So let's let's put that in perspective. And the one thing that the one the type of, private credit funds that we do look for are the ones that secure the loan with assets. So they tie it to buildings, equipment, you know, things like that. So if, if the company goes belly up or they start having a hard time, they, they take over the company and they sell all the assets and they recoup their money that way. So that's my kind of high level wonky analogy to, to describe what is really happening. Yep. It's obviously a lot more, sophisticated than the way I laid it out. But now you can kind of get a sense of what what is happening. Yeah. For sure. Yeah. You know, it's, this, this sector of the market really came about back in 2008, 2009, and all the legislation that was passed, you know, after the the global financial crisis as a, you know, related to the housing market. So it, you know, the standards got raised for how, you know, who could borrow money, how much they could borrow. So these funds became a huge part of that kind of middle tier business. But, you know, we should mention, you know, middle tier business are still usually giant, businesses. Right? And there a lot of them, like Tony said, aren't even, publicly traded. A lot of them are backed by private equity. Right. So we'll talk about that too. But what that means for the investments is that, you know, private equity, who owns a particular company is not going to let that company go belly up. You know, just because they start missing payments, they obviously have a longer term investment in that company. So you know that while it may sound, I don't know if dangerous is the right word, but while it may sound more complicated than just going out there and you buying a government bond, it's the, the return, the risk return profile that you get from an investment like this. Yeah, is actually much better than than just your, you know, standard old bonds. Yeah. It has a risk profile like a treasury, but gives the yield of a higher than a high yield corporate bond. Yeah for. Sure. So like I I've, we've seen some of the, the statistics behind this or I guess the investment history of it. You know, like let's take like Covid or 2008, the banking crisis in 2008, 2009. These like, like, bonds and fixed income. So like this private credit that we're talking about is more in that fixed income category. Yeah. And during those bad periods of Covid in 2009, fixed income was down 15 to 20%. A fund like this was down more like mid-single digit. Right. And right now there currently some of the funds that we have seen are yielding anywhere between 7 and 10%. Right. I'm going to continue to reiterate this through everything that we talk about. We are talking about a lot of the pros. Again, one of the cons, though, when you're start dealing with private placements or alternatives is liquidity. It really is like they are you can't buy it today and sell it next week or next month or next year. Sometimes you have to wait for quarterly distributions or quarterly redemption redemptions. And sometimes the company say, now we got other plans in mind. We are not giving you your money. Yeah. So these are these are long term investments and they are meant for, come slivers or slugs in your portfolio, anywhere between 2 to 5%. And again, and sometimes they're not even meant for everybody. So we're going to dive into that a little bit later. But every time I'm going to talk about this again, all of these investments sound great, but they may not fit your either risk profile or your investment profile. Yeah for sure. Yeah. But we'll keep reiterating that as we go through. I'll wait for Tony that, to dive into that first, but yeah. Yeah, definitely not not for everyone. You know, like all investments, you need to make sure that they fit your specific profile. Yep. The next one would be, would be, like private private rates. So real. Right. Investing in in real estate. Yep. Now, I have seen in the past, and particularly like people have gotten into like these private rates back in 2004, 2005 and they just got wrecked. Yeah, I, I've seen this. It was it actually scared me for the longest time to invest in, in private real estate. Right. Because it was, you know, they were high commission products, that were being sold, for, you know, let's just say, like, you bought a share for $10 and three, 3 or 4 years later, it was, you know, so illiquid that people were offering a dollar for the $10. You and I mean you just got wiped. Right. Yeah. But they and and people were investing on the promise that they would have these high yields. And that's and that's what real estate really is like. We gotta, we have to understand that real estate is not liquid right. They don't buy a building this year and sell it next year. They, they they buy the building. They make capital improvements and they fill the building. Right. That's the biggest crux of, the, of real estate. So we, we want to find for like companies that are buying quality buildings and we're, they're, they're filling these buildings. Right. And they have a history of doing that. Right. So they're they're investing in commercial real estate. They're they're typically maybe like a triple net lease where, essentially I own the building, but my tenant takes care of everything else repairs, utilities, everything taxes. Like, you're just sending me a chat for to rent the space, right? Essentially. I mean, again, I kind of bring all of, like, the high technical talk down to, to, you know, how I can explain it, but it's it's essentially I own the building and you take care of the rest. Just send me a check every month. But this is this is like the you got to find those, those types of companies that are investing in, you know, multifamily homes, apartment buildings. Because think of how the, the current housing industry is. It's hard. It is hard for new people. If you've never owned a house before, it's nearly impossible to buy a house. Yeah, because of interest rates and the fact that, you know, we, you know, we're actually don't have enough houses, right? They need to continue to build them. But everything is has doubled in the last eight years on on housing. If you bought a house for 250 grand six, seven, eight years ago, it's doubled. It's $500,000 now. So people need places to live. So looking for those, those, places that are doing, like, again, apartment buildings, you know, multifamily housing, housing developments, things like that. So what are your thoughts? Yep. So, yeah, you know, like, Tony, we we, you know, grew up in the business seeing these rates just getting absolutely destroyed. So it is important to note the distinction between just a regular old REIT and private real estate. What what we're talking about, you know, the easiest way I like to explain it is as a REIT is basically, a stock that that owns real estate. Those are, based a lot on value. And that's, that is the primary reason they got trust so much in, you know, the early 20 tens, coming out of the financial crisis because the, the value of the real estate just got crushed, right. A lot of these, investment that we're talking about, especially for high net worth people, these become income streams for them. Yep. Same thing like the the the the credit. Yeah, the private credit. That's exactly what real estate does too. It doesn't it may not appreciate as sexy as a stock, but it's generating the income. That is again a diversifier in. Absolutely. Inside of the, retirement portfolio. Yeah. So, you know, for example, like, you could own, because I've had diamond hands on this one for a long time. I'm just too lazy to sell it, I guess. But, like, Pulte is a home builder. Yeah. We, we almost bought, like, a condo, you know, before in 2012 or something like that from Pulte. And so I knew the name and I invested in it back then and has done really well. You know, they're they're building homes, doing doing stuff like that, you know, the this type of real estate is, is meant to be kind of level, you know, a nice level price of the investment and throwing off, you know, like a nice 8 to 10% income stream per year. Yeah. That's what you're really looking for on these private investments. And the private real estate, I should say they obviously blew up in 2021. In 2022, when the values of, the homes and the, you know, different, investment properties were, were going through the roof, you know, we saw a lot of capital appreciation there, but it is meant, like Tony said, to be a, diversification piece and and an income piece, you know, something that we know is going to be stable and throw off a nice income. And, again, to be able to get into an investment like this, you need to have really great liquidity, right? You have to have the ability to take that chunk of money and say, hey, I don't I don't need the chunk. You know, for a long time, what I do need is the is the interest and the income that comes off of it. I'm going to spend that. But but the the investment that you put in, you know, that is going to stay put. And like Tony said, you can put in for redemptions. Right. And, you know, if no one else is putting in for those, you could probably get a good chunk of your money back. Yeah. Again. Again. Real estate's not very liquid, right. You know, and so the redemption on this side again is the liquidity side of it. But you do want to look for those, those stocks or not stocks, but these, you know, these, these rights that are, you know, right now, like looking at like hospitality, looking at self-storage. Right. So like these storage places are they build them and they fill them. Right. Self storage is such a scam. I guess. I rent I rented a, like, a storage unit when I redid my basement because I had a, just a small portion of it. Yeah. And they just, they they lock you in, and then they just give you price increases when all your stuff is there. So, like, you can't move it out because you need the storage, but they just give you a price increase after price increases, like doubles the price in like six months. Really? Yeah. It's crazy. They don't have a contract like 12 month now. The no no like month to month. You just you just get a random email that says, your, your rent's going up 20%. Oh yeah. Every month. It's a, it's a good business to get into. Bank and then data centers. Right. You know, with I, housing all of this, this hardware, right, is another thing. So again, keeping your eye on what the read is actually investing in the, the brick and mortar, facilities that they're pumping their money into. The next one is, is private equity. And you know, what private equity is, is there's a lot of companies, successful companies, quite a few companies, one, actually, that are privately held. They're not publicly traded. They could be between $15 million of revenue to $250 million. Revenues. They're they're they're they're pretty much a micro stock. You know, buying. Right. And again how how does this work. They take money from me from Derek, from our engineer Chris pull this money together. And then they buy into a company. Do they buy it all. Do they buy a portion? You know, it all depends on how the deals are struck. But they essentially go in and retool the whole company, you know, help take a $50 million revenue company, which is a great, fantastic company, and take it to 250, because maybe that owner just got landlocked, right? They got they got locked. They can't maybe get out of their own way. They can't they they need capital infusion. They need higher brain trusts. Right. People in the in the room that have taken companies bigger and know how to scale and how to do that. So like that is that is what it's really the good part because these PE firms are not going to come in without doing their due diligence and see the opportunities that are being missed by maybe current owners now, and also because they're not publicly traded, there are less restrictions than publicly traded stocks. Right? You can these teams, these teams can come in and make huge waves without disrupting stockholders, publicly traded stockholders, things like that. They're they're okay with maybe even going backwards for a year or two so that they can accelerate going forward. Yeah. So, that's a that's a I think that's a good way to describe it. Do you how do you how do you look at this. Yep. You know, it's again back in 2000 and, eight, 2009, lots of companies going out of business. You know, even before the tech bubble and, you know, 2000, 2001, the result of that is it became a lot harder to become a public company. And frankly, a lot less desirable, too. Right. Obviously taken, you know, if you, you know, create a company and then take a public when you take a public, that's how you get super rich. But you know, the, you know, being a CFO for a public company, you know, is just a very, very difficult stress job, you know, with, with your, you know, frankly, your freedom on the line because of all the penalties that they started attaching to, you know, rightfully so. You know, companies that were taking advantage of public trust. But, you know, the long and short of it, there's a lot of great companies that you just can't go to the stock market and invest in. Right. And that's what really the this private equity, sleeve comes from is getting invested in those companies. Yep. And so, you know, as we kind of wrap up this the show where, you know, why don't I don't a lot of advisors offer this, right? And you have to understand how that financial advisor, how they run their business, do they do they run it as like an independent Ria or registered investment advisor like us? We're we're a fiduciary. We're fee based. Or do they run their business like a, you know, a commission based type of firm where they have to clear through a broker dealer, things like that. You know, as us, we we clear, you know, our, our clients assets are held at Schwab or Fidelity Interactive Brokers wherever it may be. But we're fee based. We can't accept commissions. And we're when we advise on these and and and it makes sense for a client. We are it's just part of the AUM fee. There are no commissions upfront to me. There's no, commission losses for, you know, the client and also compliance like these are non non traded securities or alternative. So like they're not I can't just go on Schwab and buy them. All right I have to fill out paperwork there. I'm going to give them my money. That money might sit for weeks or months until they find the opportunity to invest in. Yeah. Right. And again they're, they're not and they're not commission heavy. So sometimes financial advisors don't they're not, motivated to put a client into it. And, and that's where the fiduciary versus the suitability standard comes into play. Yep. And you know it's, one last thing. The reason why, you know, firms, firms like us can, can get into these products is really because, you know, we can kind of pool your your funds don't. Well, I guess they go all go to the fund, but the, the, the, the minimum requirements. So if you were just a person off the street and you wanted to invest in a private equity fund, you know, the, the hurdle to do that is, you know, very high, you'd probably have to do, you know, 250,000, $500,000 investment here. You know, because we're a firm with clients. You know, we can kind of aggregate to get to that number so you can get a smaller initial investment and still get, you know, into that fund. Right. So so that is important. And but you know, also typical are also important to note that, you know, a lot of these investments that we talked about are meant for portfolios, probably of $1 million or more. Again, if you wanted to get off these investments, you know, just off the streets, you would probably have to be an accredited investor. Yeah. So you can usually you don't usually have to have that requirement, when you get them through firms like this. Right. An accredited investor is typically $1 million of, liquid, not net assets. Yep. And, you know, as final thoughts as we wrap this up again, these aren't for everybody, right? We have to use them properly, to unlock the the advantages of it, because maybe we don't. Maybe the asset size isn't there. You know, Derek mentioned, you know, $1 million in above, distributions. Right. Like how how, you know, you could you could still get into these if you have 500 grand, but you better have some in retirement. You better have enough income sources where we don't really have to aggressively take distributions from the accounts, because, again, these are long term investments. They are usually rather illiquid on on a short term basis. Right. You know, I think I, I, I was working with a client, we got into the we really liked it. It made a lot of sense. And then he just had an opportunity that he couldn't pass up. He needed to liquidate the accounts to buy some property, that he's been looking at for years and years and years. And it finally the deal came through. It took us maybe 6 to 9 months to liquidate. You know, the, the real estate side, right? Because it is like one quarter they told us no, you know, so we have to size this appropriately and figure out which, if not all of them, if we want to implement those. And then also it could be a pro and a con volatility. These aren't these aren't home runs. Right. They're they're singles and doubles. Yeah. Because they're going to generate great income. They're going to be steady, performers over a long period of time. So if you're looking for 20, 50, 100% rates of return, this is not it. If you're looking for steady, you know, high single digit returns over a long period of time, this could be it. Yep. So that's again figuring out your asset size, your distributions, and it all comes to financial planning. Does it fit into your your plan? Yep. So. Well said. Yep. And, you know, I think these, can definitely be discussed as part of your, your overall portfolio, but definitely need to, to fit in there properly. Yeah. But you know, it's any investment that we look at for our clients, it is really it comes down to risk adjusted return. And that's what we're looking for is to increase the return for for risk that that we take. Yep. So, well great topic this week. Thanks everyone out there for listening. If you guys have any questions, ideas for a show, hit us up at info@connect.com and we'll talk to you next week. The opinions expressed in the podcast. Are for general informational purposes only, and are not intended to provide specific advice or recommendations for any investment, legal, financial or tax strategy. It is only intended to provide education about the financial industry. Please consult a qualified professional about your individual needs.