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Diversification: Spreading the Wealth

King Solomon reigned over some of the most prosperous and stable years of the Israelite kingdom. According to both Biblical and historical accounts, the wise King amassed wealth from near and far, traded with other kingdoms and instituted ambitious building projects including an enormous temple. The key to the monarch’s riches? One answer might be his willingness to diversify – a principle that guides successful investing even today.

Commandments Six and Seven of Jason Hartman’s 10 Commandments for Successful Investing echo the Biblical monarch’s philosophy of putting some of his wealth into the areas around his kingdom, and emphasize the importance of staying open to investing possibilities anywhere they might arise. As King Solomon knew, it’s wise not to keep all the eggs in one investing basket.

The sixth of the 10 Commandments for investors reads, “Thou shalt diversify.” Diversifying – investing in as many properties as possible, in a variety of markets –reduces risk and maximizes return. This approach offers some protection against the economic ups and down of both local and national economies and saves investors from losing everything in one collapse.

The Seventh tells investors,“Thou shalt be Area Agnostic, ” which defines the best way to diversify. In the religious sense, an agnostic isn’t attached to a particular set of beliefs, preferring to keep an open mind about all possibilities. In real estate investing, an “area agnostic” remains open to opportunities everywhere, not just in the local area. This attitude of openness also applies to the advisor an investor chooses to work with.

Following the advice of Commandment Two, “Thou shalt have a professional investment counselor,” an investor needs to find a qualified individual – not a corporation or a brokerage — who can guide the investing process. One important factor in choosing that counselor is a willingness to be just as agnostic in terms of potential markets as the investor is. This avoids conflicts of interest and opens up more opportunities for profitable investments.

Because of the demand for rental housing, opportunities to find good investment properties can be found in many areas of the country. As Jason Hartman advises, in order to take advantage of those opportunities, investors and their advisors must remain area agnostics; open to diversifying and to finding good investments in markets anywhere. And as King Solomon’s successes in creating prosperity by putting his assets to work outside the country demonstrate, diversification into areas far and near can yield big returns at home.

The Solomon Success Team

 

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