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Why I Love Inefficient Investments

By March 14th, 2024No Comments

“I would say that financial markets are very inefficient, and capable of extremes of being completely dysfunctional.”

— Jeremy Grantham

I am a very efficient person.

I hate wasting time and love being productive.

I fired myself from my old job so I could enjoy my time more.

However, when it comes to investing, it’s wonderful to be in inefficient markets.

An example of efficient markets is stocks you can buy and sell everywhere in the world.

Everybody has all the information they need on what the deals are.

A lot of people believe every market works this way.

To them, if a great looking deal was the real thing, it wouldn’t be available.

There’s gotta be something wrong with it.

Inefficient markets prove that isn’t necessarily the case.

Take single family housing for example.

In my neighborhood, a three-bedroom, two-bath house sold for $1.64 million last month.

For a 1,500-square-foot home, that’s pretty normal in the LA area.

A similar house – three bedroom, two bath, 1,200 square feet – sold for $849,000.

That’s about half the price.

How could that happen?

Sure, the houses are a little different, but there’s also an inefficient market going on.

Some houses will sell for less than what they’re worth because of unique circumstances.

Today, we’re gonna get into why this happens and how you can take full advantage.

Let’s jump into it!

1. Deals Are Out There

There are deals out there if you’re willing to look for them.

We talked about real estate before, but inefficient investments are found in many different kinds of asset classes.

You can do very, very well if you’re not stuck on one asset class.

I invested in oil during COVID.

In April 2020, oil was -$38 a barrel.

That means oil companies were paying people to take oil off their hands.

To me, that seemed like a fantastic opportunity.

I made about 2.5x my money in a year.

If I had been savvier, maybe I could have found a way to make much more.

But either way, I did end up making money.

Investing in oil was deal when I found it.

It cost money to get that oil out of the ground.

They were basically giving it away at the time if you had a place to store it.

Warren Buffett talks about this exact principle.

He talks about buying dollar bills for 40 cents.

You might be thinking: “Wait. That doesn’t make sense.”

Why would somebody sell you a dollar bill for $0.40?

Well, there are unique situations.

Sometimes people are in debt or they need to sell at a certain time.

In these situations, they’ll sell at a discount because of the condition it’s in or because of the time in the market.

Ben Graham, Warren Buffett’s mentor, talks about Mr. Market as almost like a person.

Sometimes, Mr. Market is super enthusiastic and everything is expensive.

The next day, he’s depressed and will pretty much sell anything you want for cheap.

That’s the best time to buy.

If you’re willing to do the work and look, you can find phenomenal deals out there.

That’s all thanks to an inefficient market.

If the market was efficient, these deals wouldn’t exist.

2. Different Assets Are More/Less Attractive at Different Times

Time is a very important factor when looking at deals.

A terrible time to invest in multifamily could be an amazing time to invest in precious metals.

I’m a big precious metals guy.

There’s a 5,000-year history of using precious metals as money.

Mike Maloney has a 10-part series called The Hidden Secrets of Money that talks all about this.

I highly recommend watching it here.

You can learn about what money is and how it’s evolved.

But overall, there will always be more attractive investments.

Right now, multifamily has been challenging because interest rates have risen faster than any time in the last 40+ years.

However, there are other opportunities both inside and outside of multifamily.

You need to look at different assets.

We love businesses like senior housing and medical buildings.

Those are two investment trends going on at the moment.

There will always be great things to invest in that not everyone sees.

If there have been losses somewhere else, you can take the opportunity to look elsewhere.

In summary, I love inefficient markets even though I’m a very efficient person.

I’ve also always been a deal guy.

I like going into private markets where there’s not a lot of public information.

Even as a kid, I loved going to garage sales and finding great deals.

Alongside this strategy, working with sellers directly can be a great experience.

Whatever you do, you need to spend time finding the right deal.

Keep your eyes open.

Ask yourself if you’re getting in at the right time.

Now I want to hear from you!

What inefficient investments are you looking at?

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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