Editor’s Note: Michael Cobb is the CEO of ECI Development, a leading real estate development company focused on the emerging markets of Central America. Mike has spoken at hundreds of investment conferences about real estate financing and development, and consulted with top projects and investment publishers on the subject.
With this issue of Golden Opportunities, Mike begins a three-part series on questions that every serious investor needs to ask about the markets and their wealth.
Critical Self-Analysis: The Key To Safe And Profitable Investing The first in a three-part series on questions we need to ask ourselves when investing.
A Guest Editorial
By Michael Cobb Dear John, The better we understand ourselves, our goals and our decision-making process, the better investors we will be. That may sound obvious, and easy, but this couldn’t be further from the truth. In fact, for self-analysis to be relevant and useful, it also has to be honest and objective. Even ruthless.
In this first offering of a three-part series for Golden Opportunities, we will examine the serious questions every investor needs to ask of himself or herself before making major investment allocations. (In later offerings, we will examine other investment concepts, including risk vs the perception of risk, and the supply/demand reality of a Boomer equity sell-off.)
Before we get into today’s questions, consider this: If you had a time machine and could see the future, would you make better investments? This may seem like a silly question with an obvious answer.
Of course, if we could see the future, we would develop products and services that everyone would want and need, and do very well for ourselves.
But at a 30,000-foot level, the emerging markets are like “time machines.” We know the path of progress in North America. Why not get out front next time around?
The key is to be prepared and open-minded to ideas may seem outside the box. The space inside is crowded. Question No. 1:
Am I Prudently Diversified? How much of your portfolio is international? No, not BMW, Nestle or Toyota stock owned on the NYSE, but truly international — held in the local currency to obtain currency diversification as well?
How much of your portfolio is in hard assets and emerging markets? Again, direct ownership, not in ETFs or other representative forms like a mutual fund. This is a serious question and one that needs to be addressed.
The chart below show the asset allocations of various Ivy League schools, including performance standout Yale University. As you can see, these portfolios show very little invested in the U.S. markets. In every case, the majority is diversified into other asset classes.
What do they know the average investor doesn’t? http://www.marketwatch.com/story/heres-how-yales-endowment-left-its-ivy-league-rivals-behind-2016-10-20 Does your diversification look anything like this? Or are you heavily weighted in traditional U.S. and Canadian equities? These guys aren’t. They know the value of true diversification. They have strong position sizing for real estate (orange), commodities (green), and emerging markets (baby blue).
The Harvard University endowment invests 10% of their $30 billion portfolio in timber. Until recently it was hard for the average investor have direct ownership of timber. But now it’s simple and, when done right, combines to help on our third question later, “What’s your plan B?”
Professional investors know the key to winning is to take money off the table when the getting is good. The Dow is over 23,000 right now. Maybe this is a great time to take a chunk of profit off the table and diversify a part of your portfolio into hard assets like real estate in emerging markets. Big money is. How about you?
But before you do, please download the Consumer Resource Guide for Property Ownership Overseas. This manual contains 15 questions that we should ask before we buy any real estate overseas. Questions that one might not think to ask, like, “Is there any zoning?” or “Is the home plumbed for hot water in all the bathrooms?” or “Can I get there in the rainy season?” This guide features 12 more questions like these that most North Americans just simply don’t know to ask. Download the Free Guide Here.
One other point about buying an investment property overseas is to make sure that you align your purchase with your investment goals. The chart below will help align your goals, either cash flow or appreciation, with the country or region most likely to deliver it. Note: Belize is in the sweet spot of the curve right now, offering real cash flow but also appreciation in the near term. Question No. 2:
Do You Have A “Plan B” In Place? The Boy Scouts have a motto, “Be Prepared.” Said another way, “Hope for the best, but plan for the worst.”
In short, we are wise and prudent to make plans for the downside of life. We own insurance for health, home and auto. Trusts protect assets and things for the long term. But what about us? Have we protected our most valuable asset — ourselves?
At Freedom Fest this year, I asked the hundreds of people in the room to stand for an experiment. It was simple. I asked, “How sure are you the U.S. or Canada are headed for a train wreck economically, politically and/or socially?” People would sit when we reached their level of surety. I worked my way to, “Are you more than 50% sure we are headed for a train wreck?” Over 500 people remained standing at “50% or more.”
They believed a train wreck was imminent.
Then I asked, “How many of you have a second residency?” All but a dozen sat down. Leaving for another country is easy. But far more important for a viable Plan B is, “How do you stay overseas?” You don’t want to be an illegal immigrant on someone else’s country, do you? If not, you need a permanent residency.
The Plan B for our most important asset must be either a second residency or second citizenship. Both are great but a second citizenship can be quite expensive. But a second residency is nearly as good, far less expensive. In the end, most people want a simple, affordable Plan B.
One of the best second residency programs in the world is close by North America with dozens of daily direct flights. English is widely spoken. They have had the fastest growing economy in the region for over a decade, producing political and economic stability, factors very important for a solid Plan B location. The country is Panama.
A second benefit beyond affordability is the ease of maintaining it. While many countries offer programs costing the same, only Panama lets you just visit one day every two years to maintain the visa. Fly down for a long weekend every other year and keep your visa.
The third benefit is the ownership of timber as the basis of the residency. Remember Harvard with its $3 billion timber investment? By pairing up residency paperwork with 19-year-old mature teak timber in Panama, you get the best of both worlds: the protection of an easy, affordable Plan B and a strong timber investment. You’ll leave a legacy investment for the kids, grandkids and beyond as the plantation is harvested and replanted generation after generation.
Learn more about how you and your family can have the ultimate in asset protection and a deeded teak timber parcel for less than $23,000. Request the Second Residency Handbook and Teak Hardwoods White Paper here. Question No. 3: Are you ready to live overseas? Many people think that they’d love to live overseas. It’s a great dream, a life’s goal for many, a quest to find a better way of life, a simpler way of life, a higher quality of life, and one that almost always costs far, far less.
The quality of life is phenomenal, especially having a maid to take care of all the chores. And the ability to eat healthy, organic, fresh foods is the sweetness of life. I know. I’ve enjoyed living overseas for 14 years, raising a family there, and seen first-hand just how easy it can be.
If you are thinking about a life overseas, wouldn’t you like to know, ahead of time, if things will work out well for you too? The short quiz at the link below is the best I’ve ever seen. The quiz asks us to rank each characteristic on a scale of 1-3, where “1” is not much like you, and “3” describes you very well. In the end, you add up the points.
Here are the first few questions to give you an idea of how easy this is. ____ Are you usually one of the first to try new things, new foods and new experiences?
____ Are you able to relax, willing to adapt to a slower, easier going pace?
____ Are you a self-starter who doesn’t wait for someone else to get things done? Despite the simple format, the results are incredibly accurate and gets to the heart of your personality, which is the bedrock of success or failure as an expat. Take the Quiz Here So where do we go from here? If you are not yet global, dig in and see what opportunities exist that make sense for you. For investors, follow the big, big money of the Ivy League endowments. The emerging markets are time machines, poised to let you position yourself in the path of progress having already seen the future.
For lifestylers, the high quality of life and extreme affordability of a residence overseas can be attractive. Some people like a Caribbean or Pacific Ocean beach home, others a “Springtime all the time” climate in the highlands, and others, a vineyard estate. All of this, and more urban, rural and everything in between is out there if you know where to look and how to look. But for everyone, preparing a Plan B is critically important. For less than a small car, that ultimate protection for you and your family is yours. Pairing up a hard asset, international commodity, in the emerging markets with a permanent second residency visa should be a no-brainer.
I’ve spent 24 years working and living outside of North America and developed these resources for folks who want to go global, but may not know where to start. The resource tools at the links below are free. See if they make sense for your international aspirations. Consumer Resource Guide for Overseas Property Ownership
"Are you ready to Live Overseas?" Quiz
Teakwood Investor & Residency White Paper |
