Analysis Paralysis: The Cost of Not Investing

I was recently on a phone call with a potential investor who is a friend of mine. He had recently come into some significant funds, and I was offering a ground-floor opportunity to invest in a great multifamily real estate fund.

His response was a typical, scared approach to money. He had been listening to the media about how we are about to go into a recession and we are on the verge of World War III with China and Russia. He then began to elaborate on how every investor he knows is selling everything and buying gold.

Now, I don’t have anything against gold. I own some myself just for diversification, but it is hardly a good “investment” and really not even a great safe haven. The conversation just reminded me of how difficult it is for some people to take the emotion out of investing.

Warren Buffet famously said, “We attempt to be fearful when others are greedy and to be greedy when others are fearful.”

Many of the potential investors I have spoken with lately have this uneasy feeling about the future of the US economy. They want to wait until conditions improve, or they want to wait “to see how it goes first.”

What is it about investing that makes people hunker down and shield their money when times look uncertain? Take, for example, cryptocurrency. A couple of years ago, it was all the rage. People had no problem buying Bitcoin when it was at $68,000 and going up every day. People pile in at sky-high prices, only to watch it fall and then sell when it hits $28,000.

There is a common notion out there that investing your money in real estate means you are “taking a chance” with your money. It’s like they equate investing in multi-family real estate much like placing a bet on a craps table and rolling the dice. In fact, the opposite is true.

By not investing, you are 100% guaranteed to LOSE money! The difference is that the money lost will be invisible. Opportunity loss is money that is missed out on by not investing.

Let’s say you decided to play it safe and placed $100,000 in a high-yield savings account yielding 4% over 20 years (the chance of a bank giving a rate this high for 20 years is almost impossible). At the end of 20 years, you will have saved $222,258.

Alternatively, you could place that same $100,000 into our Grand Vision Capital Wealth Fund, which would buy 5 shares of the fund. Our fund has a targeted yield of 20% per year with regular distributions.

At this rate, the investor would receive their initial $100,000 investment back in 5 years. The 5 shares that the initial $100,000 purchased would still be owned by the investor, resulting in infinite returns. In 20 years, you will have $3,833,760.

So the opportunity loss in this case is $3,611,502!

This is without even factoring in the tax benefits of depreciation.

Let’s play devil's advocate and say that the worst-case scenario happens, like my investor friend thinks. We go to war and the economy crashes. In this case, let's say the fund doesn’t even come close to projections and only yields 5%.

In 20 years, you will have $265,329.77. That’s still $43,071.77 more than just throwing money in a savings account. Again, this is not including any tax benefits from the real estate. It’s worthwhile to note that should this worst-case scenario happen, the Federal Reserve is almost certain to lower interest rates, leaving savings accounts earning much less than 4%.

Now, the exciting part.

If the worst-case scenario does happen, assets go on sale.

The properties that we previously had to pay $7 million for can now be bought for $5 million. We are in a position to “be greedy.” I like to say to potential investors that a recession is actually the best-case scenario for us. People will always need a place to live, and we invest in stable Midwest properties that are on the lower end of the rent spectrum. In other words, when times get tough, our properties become MORE desirable, not less.

You can't do any of this with a savings account. You are at the mercy of inflation, which eats at your idle money, while the Fed reduces the interest rate that you earn. It's the worst of both worlds.

It could be beneficial to save money now and then buy assets that go on sale when bad times hit. But with such a risk-averse attitude towards investing, the chances of an investor with this mindset actually pulling the trigger on a distressed asset in bad times are almost nonexistent. Most likely, the investor will wait until everyone's attitude has changed, bad times have passed, and asset prices have already recovered. They will suffer from analysis paralysis.

The best way forward is to constantly save money and then put it to work with an experienced management team. When times are good, we acquire solid properties where we can add value through streamlined management. When times are bad, we hit home runs from distressed sellers. All the while, our investors sit back and collect the returns while benefiting from tax-advantaged real estate. The biggest risk of investing is to NOT invest!

If you have more detailed questions, we created a Facebook group to dive deeper into this topic and many others.

Feel free to join us on Facebook to learn more about investing for high-income earners and high-net-worth individuals: “Road to Wealth: The Path from Rich to Wealthy.”

Many people we talk to relate to this message. They know they don’t want to watch their money wither away in a savings account, but they don’t know where to start. That is why we are here.

Just like when I have a medical issue pop up that I just can’t quite figure out, I go see the doctor.

When someone has a financial issue that they need help with, they come to us.

We would be happy to run through a quick exam and share how you can get started on a different financial path on a free 20-minute discovery call.

You can schedule a call with our team here.

*This article is my opinion. It is not financial advice, nor is it an offer to sell a security. Anyone interested in investing must first schedule a call with our team and review our private placement memorandums before investing. All investors with Grand Vision Capital Group must be accredited investors. If you are interested in investing, you can schedule a call with our team here.