Review the Intrinsic Value Wealth Creation Pyramid to gain an understanding of the major investment categories in which you should consider investing.
Under our program, you have two options for investing: (1) you can invest in individual securities (e.g. individual stocks, bonds, and other investments); (2) or you can invest in mutual funds of stocks, bonds, and other investments. If you are just starting out, we suggest you invest in mutual funds. If you are an experienced investor and already have a portfolio of investments started, you may wish to consider individual securities and other investments.
The Cassandra Stock Selection Model
For individual stock selections, go the Intrinsic Value Wealth Report Newsletter’s Cassandra Stock Selection Model. There you will find a description of the Cassandra Stock Selection Model, along with step-by-step instructions and a candidate list of stocks selected by the model, which is updated on a periodic basis. The Cassandra Stock Selection Model was developed over 30 years ago by Dr. Paul M. Wendee. To view the model’s excellent record of success, see the Track Record study on the Intrinsic Value Wealth Report.
Alternative Investments
Alternative Investments can provide very attractive returns, but also generally carry a much higher level of risk. Accordingly, they are placed higher on the Intrinsic Value Wealth Creation Pyramid (TM). There are many different asset classes that are considered Alternative Investments. The following are some of the more common Alternative Investment asset classes:
- Real Estate
- Oil and Gas
- Private Equity
Potential Benefits of Alternative Investments
- May reduce the overall volatility of your investment portfolio
- May provide greater investment returns
- May provide greater diversification
- May provide greater investment flexibility
Other Considerations
You must also carefully consider the appropriate asset allocation of your portfolio that is suitable for your own unique circumstances, including your tolerance for risk. While adding one or more of the Alternative Investment asset classes to your portfolio may reduce the overall risk of your portfolio, these investments may not be appropriate for you given your risk tolerance and asset allocation needs. Please see the Asset Allocation section of this book to help you determine an appropriate asset allocation for your particular needs and circumstances. Please remember that these asset allocation guidelines are only estimates of what may be appropriate for you. We cannot guarantee that the asset allocation determined by the asset allocation guidelines in this section of the book will be appropriate for you. You must make this determination on your own with the help of your financial advisor, accountant, attorney, and other advisors.
The ADISA Brochure on Alternative Investments (below) gives a good overview of Alternative Investments.
Special Situations
The investments in this category can take many forms. For example, a special situation could be a very undervalued real estate investment. Some stock analysts consider special situations to involve corporate event-driven actions such as mergers, spinoffs, liquidations, acquisitions, situations involving activist investors and turnarounds. In almost all cases, stock analysts believe the target company or investment must be undervalued to be a good special situation opportunity. In the case of undervaluation, the more undervalued the better, as this provides a margin of safety. As with other investments, we calculate our estimate of the special situation’s intrinsic value where possible.
For a further discussion of Special Situations, see this link.
Visionary Ideas
We conceive of a visionary idea as a business idea or model that is new and transforming. By transforming, we mean that it is an idea or model that has not been used before, but that will have a significant influence on the way the world does things in the future. Examples of visionary business ideas from the recent past, which are playing a significant role in today’s world, are Starbucks and Uber. If we go back further in time, the automobile had a significant impact on the world when it was first introduced. Going back even further, the printing press transformed the world of its time. Visionary ideas that are moving to the forefront at the current time are self-driving cars and artificial intelligence, to name just a couple. These are the ideas that many entrepreneurs strive for and have been known to deliver both industry-wide disruption and success.
International Securities
When investing in individual domestic stock securities, consider using the mutual funds for the other portion of your asset allocation into bonds, international securities, and real estate securities to ensure adequate diversification.
Real Estate
There are several ways to invest in real estate. Two of the more common ways are discussed below.
Real Estate Investment Trusts (REITs)
When investing in individual domestic stock securities, consider using the mutual funds for the other portion of your asset allocation into bonds, international securities, and real estate securities to ensure adequate diversification. The Mutual Funds page lists a mutual fund that invests in REITs and other real estate securities.
Individual Real Estate Investments
If you are new to real estate investing, there are many non-profit real estate investment groups that can provide assistance in the form of knowledge, contacts, and general peer support. Two organizations with which I have had good experiences are:
San Diego Creative Investors Association (SCIA)
For Investors By Investors (FIBI) – Long Beach Chapter
Bonds (Corporate, Government, and Federal Agency Issues)
When investing in individual domestic stock securities, consider using the mutual funds for the other portion of your asset allocation into bonds, international securities, and real estate securities to ensure adequate diversification.
ADISA Brochure on Alternative Investments