Every time I tried to get “smart” and choose “the next good investment,” life crammed a modest pie down my throat. I don’t do that anymore.
In my stock investing, that means broad index funds instead of picking individual stocks. From large to small companies, from American to international companies, from every sector: I participate.
In my real estate portfolio, that means spreading small ($5,000 to $25,000) investments across every conceivable axis. Here are the six axes I make sure I diversify.
1. Geography
I have invested in over 40 passive real estate investments, spread 16 states and dozens of cities.
I have the humility to know that I cannot predict the next hot market repeatedly. Maybe I’ll get lucky with the first one or two, but sooner or later the law of averages will catch up with me.
So? I made the law of averages work for me. Instead of parking $50,000 to $250,000 in a few investment properties and hoping I’ve picked a good market, I practice the dollar cost average. Every month I invest €5,000 or more in a new agreement.
Some will do great. Others may have a hard time. Most will occur around the middle of the bell curve.
That’s okay. I can sleep at night knowing that the law of averages has my back.
2. Asset class
The same principle applies to assets class.
My fellow investor club is watching it multi-familyindustrial, rural, mobile home parks, storage and more. Again, we’re not trying to pick the next hot asset class. We know that by diversifying our investments we gain full spectrum exposure and protection against unpredictable crashes.
Sometimes investors even end up with multiple types of assets in the same property. “One of my best diversification moves was purchasing a multi-family home with ten storage units attached,” explains active investor Austin Glanzer. 717 home buyers. “The storage units help offset the mortgage and require very little maintenance. Tenants rarely contact them, yet they significantly increase NOI and property value.”
3. Debt versus equity
Seize that property diversification one step further, our co-investing club also invests in security debtsnot just stocks investments.
On the debt side, that looks like private bonds backed by a first position lien on real estate, with a low loan-to-value ratio (LTV). For example, last year we lent money at 15% interest to a land investor to help him expand his business. He put up his own house as collateral, with a lien in the first position of 65% LTV.
We invest on the equity side in a mix of private partnerships, syndications and equity funds. These don’t pay as much revenue up front, but we get to share in the upside profits on the back end when they sell. They also have the potential to pay off”infinite returns.”
Debt investments provide high income on a predictable schedule. They also mature and close at a predictable time, often earlier than equity investments.
4. Timeline
I want to be rocking when I get my money back, which means diversifying across investment timeframes.
I invested in nine months notes, for quick processing. And I’ve invested in long-term investments that won’t close for seven to 10 years – and everything in between.
First I need to find a place where I can redeploy that capital, which I don’t want to do all at once. Dollar cost averaging, remember?
Second, I have to pay taxes on capital gains when a stock investment is sold at a profit. I don’t want any of those hit in the same year and driving my tax bracket through the roof. (Although I have the lazy 1031 exchangewhich certainly helps!)
Finally, some people actually want to live off these returns. I’m not quite there yet, but many of my fellow co-investing club members want staggered repayments to cover some or all of their living expenses. Have you ever heard financial planners talk about bond ladders? It’s the same concept, but with passive real estate investments.
5. The operators
Active investors often rail against me how they want full control over their investments and don’t want to to invest together with other operators. I even know a few passive investors who only stick with a few operators.
I don’t agree with them at all. I want to diversify across many different operators, And only increase my position by one after they prove they will manage my money well.
Even if you think you or some other operator is the most competent investor in the world – which I would like to challenge – you are still left with key main risk. What if you have a stroke tomorrow and become incapacitated? Or die? Or does something happen to a loved one and they put everything else in their life on pause while they deal with it?
Then there’s the fact that you just now I don’t know how skilled an operator is until he’s been through a few market cycles. I can tell you firsthand that when I was actively buying real estate in my twenties, I thought I was hot stuff. Then 2008 hit and I got a splash of cold water in my face.
I have invested with dozens of operators. Some had absolutely stellar reputations when I invested with them, and later they disappointed me. Others have proven to manage my invested money with skill and integrity.
But it’s hard to know for sure until you make that jump with them. This That’s why I jump first with $5,000, then maybe $20,000, and then $50,000.
Many members of my co-investment club are also actively investing. But they diversify their real estate portfolio by investing passively, across all the axes outlined.
6. Add related companies
Some of the industrial real estate investments I have made have exposed me directly or indirectly to the industrial activities themselves.
For example, we invested in an industrial deal a few years ago where we came in addition to the real estate, also an ownership interest in the company. The deal was fully completed at the end of 2025 and paid an annualized return (IRR) of 27.6%. Most of that profit came from expanding the business, not improving the property.
Active investor David Musser explained to me how he diversified his own real estate investments with a local company: “We own rental properties and we diversified by opening a nearby e-bike shop. By hiring the right people, the company runs largely passively. Moreover, we work Airbnb the apartment above the shop, which provides an additional income stream.”
There are always ways to diversify further.
Earn through concentration, preserve and grow through diversification
Most people make their money through one or two active income streams: their job and/or a small business. Maybe her even win big with an employee stock option or a crypto payout.
That is concentration. There is nothing wrong with it, but it can go away overnight.
You preserve and grow your wealth through diversification. Any of my 44 passive real estate investments could be hit by a fire, a hurricane, or a lawsuit. A crash in a particular sector or city could destroy the few investments I have there.
But as a wholemy portfolio will continue to grow over time. This is how I proceeded $0 to $1 million in less than seven years.
My investment philosophy of dollar-cost averaging with small amounts amounts per month helps protect me from risks. It doesn’t mean that nothing ever goes wrong, or that every investment yields huge returns. But it does mean my returns form a bell curve instead of a few isolated blips on the sonar screen, and the law of averages helps protect my money.
#Ways #Diversified #Passive #Portfolio #Search #Perfection