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The Best Investing Defense

By March 14th, 2024No Comments

“We can make up for lost money but we can’t make up for lost time.”

— Simon Sinek

Warren Buffett once said that rule number one of investing is don’t lose money.

Rule number two is don’t forget about rule number one.

Minimizing or eliminating loss is important in every investment.

We’re also living through an interesting period of time.

If you’re involved in value-add multifamily deals, you may be seeing some troubles.

Rates are rising.

It’s hard to find new deals.

Even in single family, we’re seeing 7% or higher interest rates when they used to be sub 3%

How do you play defense with your investment?

Going on the defensive during these times is really the best thing.

You need to protect your capital.

You won’t be able to see an improvement if you can’t protect what you have.

Let’s jump into how to defend your money in three simple steps!

1. Identify the Enemies

Multiple enemies want to take your money.

You need to identify them before you lose your money.

The first enemy you should look out for is bad deals.

Bad deals exist everywhere.

At first glance, a deal can look fantastic, but after a little scrutiny, holes start popping up.

Those holes can show you one or two ways you can lose money in the deal.

Finding these holes is a skill you can hone through experience.

If you’re new to investing, looking at a lot of deals can help.

Go to meetups, meet other passive investors, attend conferences.

Being active in these spaces can fast track your learning experience.

Ask seasoned investors how they lost money on a bad deal.

You should also look out for bad operators.

These people are either new in the space or just plain bad actors.

In order to avoid these people, you need to vet every operator.

Get references.

Understand who you’re working with.

The next enemy to look out for is inflation.

A lot of people are not concerned about inflation.

These people have likely bought into the opinion that inflation is only at 3%.

I’m of the belief that inflation is currently 7-8% and will perpetually be an issue.

We’re continuing to see currency creation.

From Fall 2023 to January of 2024, the national federal debt went from $31 trillion to $34 trillion.

The government is spending like there’s no tomorrow and are showing no sign of stopping.

These decisions directly impact inflation.

Inflation steals your money by making it worth less.

Don’t wait too long to invest!

Make sure that you have money sitting somewhere where it’s making money for you.

Shorter midterm investments exist where you can start making money within 90 days.

Treasuries can also help you.

The last enemy you should look out for is outside forces.

There are black swans, which means an unpredicted event.

COVID was one.

In 2008, the Great Recession was a black swan.

The current rising interest rates is another.

As they are now, these rates are the biggest increase in nearly 50 years.

You should be able to predict if a black swan is likely to happen.

That way, you can prepare and do what you can to protect your assets.

2. Diversify… Somewhat

The second way to defend your investments is by diversifying.

This comes with a caveat: You shouldn’t diversify a ton.

I know people who are in more than 50 passive investment deals.

That’s a full-time job to keep track of these!

You should be more passive.

Don’t do too much.

A good range is between 10 to 12 deals (or less!).

If you’re strongly invested in multifamily, alternative deals are a great avenue to diversify.

Buffett says diversification is helpful if you don’t know what you’re doing.

That’s why you don’t want to diversify too much.

Take your time to learn about your investments and get the best out of your deals.

Every situation is different.

Some people might put $1 million in 10 different deals.

Others might not be able to allocate as much.

Whatever your situation, remember that too much diversification will hurt your returns.

Find your sweet spot of how many investments you can handle and go from there.

3. Due Diligence

The third and final tip for a great investment defense is doing your due diligence.

It’s also the most important thing you can do.

You should take the time to ask other investors and operators about their experiences.

If you are unsure what questions to ask, email us and we’ll send you a list of 20 great questions.

A great place to start, though, is by asking: “What didn’t go well in a previous deal?”

Even some of the best operators have stories of loss.

If somebody doesn’t have a story like that, they’re either not being honest or they’re brand new.

Both of those are red flags.

To sum things up: Do your best to not lose money.

You will have loss at some point, but you can always learn from them.

A mentor of mine once said that 1 out of 20 investment deals could go bad.

Do what you can to plan for that loss so you can minimize the damage and reduce the chances of loss in the future.

Even small losses can eat into profits.

When you talk with other investors, you hear about positive returns all the time.

People don’t often talk about their losses.

But I think it’s a great question!

If you ask passive investors in particular, they will probably share their worst deals.

A lot of operators will as well.

I love working with people like that.

People who are open and honest are great partners.

Now I want to hear from you!

What are you going to do to prevent loss and defend your investments?

Let us know in the comments.

Before you leave, make sure to check out our special report about inflation investing. It shares the best choices to invest during an inflationary environment.

If you are interested in investing with us, we are happy to answer any questions that you may have. Join our investment club today and we will be in touch.

Check out my new bestselling book on Amazon!

Disclaimer: I am not your investment advisor. This is for educational purposes only. I am not giving specific advice on what you can do. I am simply giving my opinions. 

Bronson Hill

Bronson used to work as a consultant for a medical device company but switched to investing in apartment buildings to make his money work for him. He started with a single rental property that made good money and, after some advice from a family member, moved into bigger real estate projects. Now, he's all about helping others get into this kind of investment to earn money without having to work all the time. When he's not dealing with investments, Bronson loves to travel, write songs, stay active, and help fight modern slavery through his work with Dressember. He believes in working smarter, not harder, and wants to share how that's possible with everyone.

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