A new law may affect your investment portfolio. The final piece of the JOBS act went into effect on May 16, 2016 and here’s what you need to know… Often called the “crowdfunding” provision, this law lets businesses to bypass Wall Street and allow individual investors to invest in them. But nobody is talking about the real impact this will have on investors and the economy. Think about this… the vast majority of economic growth comes from small businesses that are growing, but still can’t afford the $1,000,000+ in legal bills to go public on a Wall Street stock exchange. This means investors have been missing out on the most profitable part of the economy. The new law has created “Private Free Markets” and the impact may be huge. There are 3 possible effects of this new law:
Effect #1: Smaller portfolios can now access investments previously available only to the ultra wealthy
The ultra wealthy have always been able to invest in private funds and companies. Many have enjoyed annual profits of 20% or greater. The rich get richer and the poor get poorer. But that’s about to change. Some of the best investments used to be illegal for the average investor. Yes, the laws that were enacted to try to protect investors from scams didn’t stop the scams, but it did stop investors from accessing great investments. Now any investor can get in the game of lucrative private investments because it’s legal as of May 2016.
Effect #2: Wall Street is losing their monopoly and stock market performance is likely to get worse
“Going public” used to the be goal of many businesses that want to grow. Now there is an alternative that doesn’t involve 7-figure legal bills. Small business owners can now grow their company as big as they want without having to pay to play with the Wall Street boys. You know, free markets. Some people believe Wall Street has been suffocating the U.S. economy by rigging the markets, causing crashes, bubbles, and making commissions and profitable bets every step of the way. If this is true, the lessening of the Wall Street monopoly spells good news for the economy.
Effect #3: The diversification problem is solved for self directed investors
Many investors have heard about a Self Directed IRA or 401k. This account lets you have direct control of your retirement funds. You have the checkbook, so you’re allowed to invest in almost anything. The most popular Self Directed IRA/401k investment has been real estate by far. Self-Directed investors have been able to write a check to buy a property in the name of their IRA or 401k. Then any profits, rents or resale proceeds go back into the IRA or 401k without taxation. The only problem is that with real estate investments, one property usually costs hundreds of thousands of dollars. That means that a Self Directed IRA/401k portfolio has little to no diversification. If someone puts their whole IRA into a $350,000 investment property, the deal going sour can sink their entire retirement savings. Until now, most Self Directed IRA investors have had to stomach those risks. With the new Private Free Markets, investors can invest in real estate with as little as $5,000. They can bypass Wall Street and poor-performing REITS entirely and invest with real estate groups who have a historical performance of over 10% consistently. So, for example, a $350,000 IRA could be spread amongst 70 investment properties or more instead of only 1. If one deal goes sour, it only affects 1.4% of the assets owned instead of 100%. This means the investor is much more protected from losses. It’s great news for investors who are tired of Wall Street’s fees eating up all the profits and only leaving the crumbs for the investors whose money is at risk. Many are predicting that in a matter of years, the publicly traded stock market will go the way of the record player. Some people are furious, while others are rejoicing, but one thing’s for sure… investing will never be the same.
If you’d like to access the new Private Free Markets, sign up for your account at www.go.solo401k.com.
