#220 How to Build a Diversified Investment Portfolio

Hey everyone, this week we're going to talk about something so important. We educate a ton of people about different types of investments. But the question that we get all the time is how do I build a portfolio of these things? What is right for me? How much do I allocate here, how much do I allocate there? What is the right way to do this? We're going to talk about that topic today, so stay tuned. Welcome to the Passive Income MD Podcast where we talk about creating your ideal life through multiple streams of income. If you enjoy hearing about this stuff, make sure to hit subscribe. Now, let's get on with the show. Now, if you're new to investing or you've been investing for years, I'm sure you've had this thought. How do I build a diversified investment portfolio? Now, we probably all have the same goals. At the end of the day, we want to make the most and have the minimum amount of risk. If you want to do that, there's one answer to that question. There's one word and it's diversification. Many of you have heard of Ray Dalio. He's the manager and founder of one of the biggest funds in the world. And he talks about something called the holy grail of investing, where you're able to maximize or have the same amount of return as any other major investment but minimize your risk significantly. And the way to do that is to build a diversified investment portfolio. He says you should have between 10 to 14 uncorrelated assets in your portfolio. Uncorrelated means that they don't rise and fall together. We all know that concept. You don't have all of your eggs in one basket. If something goes poorly, you want to have a hedge against that, especially if your goal is to create passive income cash flow security. We know that putting all of our hopes and dream in one area isn't the smartest thing to do. Many of us have done that with medicine already, where we thought that if we hit the pinnacle, we became an attending, we graduated residency, we did all that, that we were going to be set for life. I think many of us found that that is not true at all. It's important to create other streams of income so we can decide to practice how we want to spend our time doing the things we want to do with the people that we love. It's all about diversification now. Markets go through cycles at the time of this recording, the stock market keeps hitting all time highs. The real estate market is having some volatility because of interest rates. No One knows where we'll be in a year. If you talk to the experts, they're split over whether we're headed into a major recession or whether we're going to have what's called a soft landing. I think most experts will agree that diversification is key. The question is, what should that diversification look like? If you talk to most financial advisors, they'll tell you diversification means having a broader based diversified index fund. What an index fund is, it takes the basket of however many 5005000 stocks and it is a mutual fund that covers all of those. That's what I was brought up to believe as well. But however, throughout history, if you actually take a look at it, yes, the stock market continues to go up over time when you look at it from a broad perspective. But there are periods of dryness. There are periods when it's the desert out there. There are periods where there have been 10 years or more where the stock market hasn't moved, meaning it's gone down and you takes that many years to get back to its initial peak. So is having a portfolio of just index funds good enough? It might be for some people, but it depends on your goals. If your goal is to create cash flow for yourself so that you can start to work less now, enjoy the benefits now, and not wait till a time 20, 30 years from now when that Nestech has grown to a certain point where you can decide to live your life, if that is the case, then just having a basket of index funds might not be good enough. Hey, what's up everyone? Just want to ask you a quick question. Are you ready to take your medical career beyond the traditional boundaries of medicine and amplify your impact? Well, I want to tell you about the leverage and growth accelerator community. Just so you know, we created this exclusive community just for physicians like you who want to expand their identities without giving up their doctor identities. It's an add on, it's not a replacement. When we hosted our first leverage and growth summit, I know many of you have been part of that. We realized that so many doctors were were inspired by the what and why of entrepreneurship, but needed help with the how and when. And that's why we created this community called Leverage a Growth Accelerator to help doctors learn how to start, grow or scale a thriving business and connect with like minded individuals who also want to make a positive contribution to the world. Within this community, you can experience a life of greater fulfillment. It's really a powerful antidote to burnout where you can leverage your medical degree, you for new opportunities and take command of your time and schedule so you can invest in your family's future while enjoying today. In the Leverage and Growth Accelerator, you can have access to educational materials, you can have insights from expert speakers, small group coaching, and most importantly, you're going to have community support to help you realize your untapped potential in 2024 and beyond. And we're so confident in the transformative power of this members only community that we're offering the first 30 days for free. If you're interested. I want you to take advantage of this. This window of opportunity is not going to last forever. So go now to lgacommunity.com again that's lgacommunity.com if you're ready to take your medical career to the next level, make a profound impact in the world and do it together with other like minded people. It's time to join us. We can't wait to see you inside. So what does a diversified portfolio actually look like? Well, let's talk about some of the different asset classes. There are US Stocks, there are international stocks. There are things called bonds. Yes, there's real estate. And within real estate there are having your own properties. There are investing in syndications. There are different asset classes of real estate which include multifamily or apartment buildings, industrial, commercial. There's investing in debt where you invest as the bank. Now there are commodities where there are things which you can invest in. Those are hard commodities like metal products like gold, silver, oil and gas. There are soft commodities. These are things like agricultural goods. I mean, I have friends who invest in things like corn and soybeans. But it is an asset class that many people tend to invest in. How about other sorts of alternative investments? There's private credit where you can invest as the bank. The there are angel investments where you can invest as an investor and own a piece of a business that needs funding. Kind of like being some kind of like shark tank where you invest in other people's businesses. There's investing in your own business where you have some sort of business or entrepreneurial pursuit, whether it's your own private practice or another type of business or service that you create. Now how you prioritize these things and how you split your assets really depends on a ton of variables and things to think about. You want to think about your investment time horizon, how long you want to invest in these? What are your investment goals? How important is cash flow to you? How quickly do you want to get it and how much, how much you're Able to tolerate risk? Where are you in your life right now? Are you closer to retirement? Are you on the early end? Can you tolerate a little bit more risk and a little bit more volatility? Do you have a family that you have to support? Put food on the table for them? It's important to do all of these things. So how do you build that investment portfolio? The important thing is to start with that, understand where you're at today. This is why I think it's important to not find a solution that's a one size fits all or to take advice from somebody who doesn't really understand your personal situation. Everybody's completely different. Are you? Someone has a little bit more of a stable gig in medicine, Somebody maybe it's a little bit more volatile. Are you hitting six figures? Are you in the seven figure range? Everybody's completely different. Do you live in a high cost of living area versus a low cost of living area? Do you have a spouse or partner that works as well? Are you expecting a big inheritance down the line? Are you at a point where you're trying to of reduce the amount of time you spend in medicine within the next two to three to five years? Or are you happy where you're at and just want to maybe gradually reduce your time 10, 15, 20 years down the line? Answer all these questions first. Then start looking at the different vehicles that are out there and those are the ones I mentioned. Learn about each. Understand their benefits and downsides. Understand if they fit your profile, your risk profile, your risk tolerance and your timeline. Figure out your ideal allocation in each. You know, are you somebody that could take a good amount of risk? Do you want to be in a lot of crypto or venture or angel investing to try to hit a lot of those home runs? Or do you want more stability now? Personally, when I first started investing, I didn't have kids. I was probably a lot more aggressive. I was young, I was a few years out of residency and I was in attending. But I knew that within a few years I want to already start reducing my time in medicine. I wanted more control. I wanted to do it sooner rather than later. I didn't want to wait to 15, 20 years before I could start making some of those decisions. So I started investing things right away that would create a significant amount of cash flow. But over time, as that cash flow has increased, I've been able to even create more diversification. Look for different sources of steady cash flow and the amount of returns that I would chase have changed. I've got two Kids now that are growing and having a little bit more security means a lot more to me today. And again I talked to another doc who's close to retirement. That person might be need to be in the most conservative type of portfolio. But educate yourself on each of these topics. I would tell you that's on you explore. And then maybe consider taking a small bite of some of these things to figure out whether you like it or not. You won't know if you like a certain type of investment until you actually invest in it. Doesn't matter what the education is, you can learn all you want about it. But until you have some skin in the game, you're not going to feel what it really feels like to take on that risk or to get the benefits from it. Now what are the standards out there? People talk about it all the time. Where a lot of financial advisors will say 90% should be in a balanced index fund portfolio and 10% left to alternatives, including real estate, crypto and all the others that might work for some, but for someone that's seeking cash flow now, today that may not work for you personally. My portfolio is a lot more inverted. Today about 70 to 80% of my portfolio are things that produce cash flow. Today about 20% are things that are long term places to hold my wealth, to grow it slowly over time or provide a little bit more stability. And that's the place that makes me happy, that keeps me comfortable, that pays the bills, pays for vacations, the lifestyle that I have right now. The great thing is you can change your allocation over time. There are certain things that are a little bit more liquid, meaning that you can sell, that you can turn into cash. Now there's certain things that you can't do that for, but you can always change your approach over time. And as the economy changes your life situation, just know that you will change it. So where's your portfolio today? Do you feel like you're pretty well diversified? Is it all just in your day job income? Is it all in the stock market today which is doing well, but what happens when it doesn't? Do you have cash flow coming in today as a hedge? Do you have alternative sources of income so if something happens that to your day job that you're protected, that you can decide that you have the control whether you want to change things or not. To me that's the ultimate goal of a diversified portfolio of diversified income streams so you can have the control to live your life how you want. Well, I hope this has given you a few ideas to think about. It's gotten you thinking about your own portfolio. Take a look and we'd love to hear how we can support you. Have an amazing week. Take care and let's talk again soon. Enjoy the show. Let me know by dropping a review in the podcast app you're listening to us in. And if you haven't already, make sure to hit subscribe. Join thousands of physicians who are also on this journey to creating their ideal lives through multiple streams of income. Learn more at our Website, passive income md.com thanks again for allowing me to be a part of your journey. See you next time.