Are You Really Diversifying Your Investments?

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It is no secret that the first rule in finance for a sound investment strategy is diversification. It is a rule that has served some of the wealthiest investors in the world. Yet quite often, investors are not actually doing this and perhaps are not even aware that they are not too.

Investors who co-fund business loans Homesec have every one of their investments diversified.

We do not, for example, have twenty investments on loans with us, as you would with a pooled funds lender, every loan is on its own merit.

So, if you have invested in five loans in Queensland, then say four in Victoria and then one happens to go into default, none of the others are affected, because everything is on its own merit.

Our investors (aka funding partners) are named on the loan contracts and their company is on the title as well. There are other short-term business lenders, investment banks, investment funds, etc. however, where you give the company the money and they simply invest it on your behalf, and you do not diversify your risk.

They can spread your funds over any loan or investment that they want, so that you do not have control over your investments. In this situation, you have no idea what you are investing in, which of their loans you are in etc., you simply have to hope that they know what they are doing, and that they not being reckless with your hard-earned money. The reality is that there are so many temptations and opportunities for investors to do the wrong thing.

Experience and certainly recent experience can show us that you always have to be on guard and vigilant, when it comes to monitoring your investments and who you are investing with.

We can see this with America and Europe’s recent banking crisis. Banks like Silicon Valley have had bank runs, Credit Suisse has been taken over by UBS and Deutsche Bank has been under pressure too. In Victoria the collapse of Porter Davis has been absolutely devastating for many new home buyers. Australian banks shares are currently down, and super funds have also been down since the start of 2023. Now more than ever with our inflation currently over 7% it is so important for your investments to be doing well.

When it comes to investing, we believe in Warren Buffet’s sound advice. Warren Buffet is one of the most successful investors of all time. He is known for winning in all market conditions, whether it’s a booming market or a recession. He is currently worth 104 billion dollars and is the fifth richest in the world. Warren famously said…”Never test the depth of the river with both the feet.” In other words, don’t go all in on an investment, especially, when you do not truly understand what you are actually investing in.

Warren is known for being a very patient investor. His investors often get frustrated with him because of this. If a stock suddenly jumps thirty percent, he won’t necessarily jump on it too, he is also not going with the current trend of investing on cryptocurrency.

“Be fearful when others are greedy. Be greedy when others are fearful.”

Warren Buffet

Instead, Warren sits back and waits until the time is just right, and he always diversifies his investments. Unlike amateur investors, he is not easily lured in by bright shiny things or the latest buzz company that is “sexy.”

So, it really is about not being too greedy and instead being prudent and taking your time doing all your due diligence to make sure that your investments are sound and stack up with what the glossy brochure promises. With most things in life there are no “quick fixes,” and it is the same with trying to get rich over-night.

“I don’t look to jump over 7-foot bars: I look around for 1-foot bars that I can step over.”

Warren Buffet

It takes time to build your wealth, but if you stay patient and disciplined with it, it is possible. This is how people truly get rich. They stick to their game plan, they diversify their investments, and they use their money to make money. It might sound boring, but it works! At HomeSec, we do not take unnecessary risks with your money. We always have complete transparency with our investors, so that you have complete control over what you are investing in.

It is worth noting too that this might be the ideal investment for you, if you are self-managing your super fund. To find out more about investing with HomeSec, please do not hesitate to get in touch with us, and we will be only too happy to answer your questions.