The Opportunity Today: Invest to Protect & Conserve – Steven Pesavento Transcription:
Steven Pesavento 00:05
This is the Investor Mindset podcasts and I'm Steven Pesavento. For as long as I can remember, I've been obsessed with understanding how we can think better, how we can be better, and how we can do better. And each episode we explore lessons on motivation and mindset for the most successful real estate investors and entrepreneurs in the nation.
Steven Pesavento 00:30
Welcome back to the Investor Mindset podcast. I'm your host, Steven Pesavento. Each week, we share mindset tips and real estate investing strategies to help you take your business and your investment portfolio to the next level. Today, we're gonna be talking about something that is very timely. And it's what is the opportunity in the market right now? And how can we take advantage of that opportunity that is currently forming. And one of the things that I hear from a lot of investors is I'm hearing a lot of fear, a lot of fear, a lot of uncertainty, a lot of doubt, we call that Fudd. That fear, uncertainty and doubt is causing folks to pull back. It's causing people to wonder, Where are we going to be heading next? What is going to happen in the market? And what is that going to mean for the investments that I've already made? And what is that going to mean for the investments that I'm going to be making next. So I want to talk a little bit about this, because I'm fortunate to have the opportunity to speak with people who are, let's say, highly wealthy, people who are highly sophisticated, have been through multiple market corrections, and truly understand how to make money in any type of economy. And I happen to have the joy of serving many investors, like you retail investors, folks who are working hard in their jobs or their business, they're creating great income, and they're investing that directly into real estate opportunities. And so what is the difference? What are we seeing the difference between these two types of experience levels? And when I first off seeing on the retail side, as I'm seeing a lot of people who are, who are spouting that Fudd that fear that uncertainty that doubt that questioning whether they should be getting into the market, or whether they should be getting out of the market? And this is the question that they're asking, should I get in? Or should I get out? Since I cannot get out of some of my investments that are longer term or have a lockup period, then perhaps I shouldn't get in. That's what I'm hearing from folks. And so where that's coming from is that fear uncertainty that doubt that not knowing what the right step is, however, when I go and I speak to more sophisticated investors, or I'm speaking with operators who have decades of experience, speaking to the my mentors, people who are on our board and are giving us advice and direction, what I'm hearing from those folks is, what is the risk profile of the opportunity I'm looking at? And how can we structure a deal, so that we reduce as much risk as possible while creating as much return? So let's say that in, in layman's terms,
Steven Pesavento 03:21
in the institutional investing space, they call that risk on risk off risk on is where growth is happening, we have a strong belief that things are going to be going well in the future. And we're willing to take a little bit more risk in our portfolio risk office where you're looking to take a little bit less risk in your portfolio or taking risk off. So the view that I'm seeing from folks who have 10s of millions or hundreds of millions of dollars, or perhaps who are operating funds that have billions of dollars, is they're looking at the opportunity from a what's the risk profile standpoint? And what's the return in relation to that risk? Okay, so what's the next step from there? When we understand what the risk profile is, and what the relation of risk to return is? We have to then also look at what the economic climate is holding today. Because holding on to cash, we have to understand what's the penalty for holding on to that cash. So those same folks from both camps happen to know that we're in a highly inflationary period, we have the highest inflation we've had in 2030 years. And we are not necessarily seeing inflation pulling back dramatically, you know, little opinion commentary that's likely happening because it's a supply side recession type issue that we're dealing with. In other words, there's not enough supply and it's driving up the cost cost of these goods and services. So even with the Fed raising interest rates, we're still seeing high inflation. So what comes next is important. It's understanding where inflation is believed to go in the future, and where it's at right now. So we can't predict what's going to happen in the future, any type of prediction is a guess. And we would not make our investment decisions based on that. However, I can look at what's happening right now in the present. And if I'm holding on to cash, which, at Vaughn Finch, we're holding on to some significant cash after recent exit, I'm holding on to cash I'm losing right now, on average, about 8% annually, because CPI, the consumer price index, the inflation index, is sitting at about 8%. Now, many people who are more sophisticated understand that CPI is actually low, they've intentionally removed different items from that basket to make CPI appear lower. So in reality, probably the way that I'm looking at is that I'm losing eight to 12%, maybe even more, while that money is sitting in our account. Now, it's important to have an emergency reserve, it's important to be able to have some cash that's available for times when you need it. However, with that in mind, the way that these advisors are, are advising. And the way that I'm seeing the highly sophisticated, high net worth investors investing is they're looking at how can I deploy money today, while reducing as much risk as I possibly can, and still getting 60 to 80% of the reward? How can I find an investment opportunity where I can get great returns, and I can take significantly less risk than I was willing to take 12 to 2436 months ago, that is the secret that is the opportunity. That is what I encourage everyone to be looking at. When we sit on the sidelines, we get out of the game. When we get out of the game, we stop having a an understanding a pulse on what's actually happening in the game, we start continuing to build on that belief that that fear uncertainty and doubt is justified because we therefore continue to need to justify why we're intentionally not participating in the game. And therefore in an inflationary environment, why we're choosing to have our money lose value of eight to 12% per year while that money sits in the bank. So it's a simple process of making that decision. But it totally is understandable why many people feel the way they do, I've had that feeling. And fortunately, that cycle of that feeling, I've been able to move through much quicker, because I have some highly sophisticated advisors around me. And so really, that's my job here is to pass along that advisement that I'm receiving and the lessons that I'm learning and the lessons that I'm seeing happen within the businesses of those and within the investment portfolios of those who have significant wealth. So, in recap, what can we do to take advantage of the market today?
Steven Pesavento 08:21
Well, we can assess what's our risk profile? How comfortable are we with the idea of a loss? And what type of return are we targeting, assuming that all goes as planned, and then we can then go seek out investment opportunities that match that or exceed those numbers in our favor, we can go and find opportunities that are lower on the risk profile that have lower risk, and that have higher return, maybe an opportunity for some higher upside. And we can then go deploy capital across multiple different deals. Applying that capital across multiple different deals is very effective for spreading out that risk, as well as preserve preserving our capital in a much larger pool. That way, if one project goes smashingly and another project doesn't. Overall, we're going to see smoothness within our portfolio. So that's what I'm seeing. I'm very curious to hear what you're seeing. If you're watching on YouTube, let me know down below in the comments, or shoot me a message on LinkedIn or on Instagram, the DMS at Steven.Pesavento appreciate you guys continuing to learn and move forward towards that freedom, flexibility and fun that you're looking for in your life. If you're interested in getting involved in the same type of investments that I personally invested in, where we're going to be moving a significant amount of that cash that Vaughn Finch has on the sidelines, head over to Vaughn finch.com/invest and get registered so you can get on Our next newsletter on what's going on on the market today. Thank you so much. I hope you have a beautiful rest of your week.
Steven Pesavento 10:10
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