Jonathan A. Dieguez

First, allow me to say congratulations on taking your personal finances into your own hands. It is one of the toughest and scariest, yet rewarding decisions an individual can make. You are about to venture on an incredible, life-long journey filled with limitless possibilities. However, make sure you are properly prepared, or else the outcome may be devastating.

The main purpose of this article is to serve as a quick checklist for preparing, creating and structuring your future investment decisions. First, there are a variety of asset classes to invest in. Equities, Fixed Income, Commodities, and Real Estate are the primary investment classes and also the focal point of this piece.

Equities (stocks) and fixed-income (bonds) are financial instruments for investors to obtain a return and for companies to raise capital. Put very simply, stocks offer an ownership stake in the company and bonds are analogous to loans made to the company. Stocks of a company are offered at the time of an IPO (Initial Public Offering) or future equity sales. The company offers investors an ownership stake by selling stocks. Stocks can be either common stock or preferred stock. The value of stocks corresponds to the value of the company and therefore, stock price fluctuates depending upon how the market values the company.

In contrast, bonds are loans offered at a fixed interest rate. When a company believes that it can raise capital cheaper by borrowing money from banks, institutional investors or individuals, may choose to offer interest-paying corporate bonds. With bonds, an investor is promised a fixed return. While bonds are “safer” than stocks because of lower volatility, it should be noted that there is always a chance that a company will be unable to repay bond-holders. In that sense, bonds are not “risk-free”. They are also more sensitive to interest rate fluctuations when compared to the equity asset class.

By definition, a commodity is a marketable item (either a good or service) produced to satisfy the wants or needs of the general public.  One of the characteristics of a commodity good is that its price is determined as a function of its market as a whole. Well-established physical commodities have actively traded spot (current) and derivative (future) markets. Basic resources and agricultural products such as crude oil, coal, salt, sugar, tea, coffee beans, soybeans, aluminum, copper, rice, wheat, gold, silver, and platinum are all examples of actively traded commodities.

Real estate is an “alternative” investment asset class which has received a lot of attention from investors over the past decade or so. There are a few ways to invest in real estate; first you can make a direct investment in real estate by finding a piece of property you like, getting a mortgage from a bank, analyze potential rental income or resale price, and go to closing. In my opinion, direct investments in real estate can have the highest payoff, but they also carry the highest level of risk. A second option is to put your money in one or more publicly traded REITs (Real Estate Investment trust). The REIT managers will invest your money in various properties that they deem appropriate and also manage the properties, take care of all the expenses, and look for appropriate times to sell the properties at a profit. REITs pay out around 90% of the profits they earn every year in the form of a dividend ranging from 3.5 % to 5.5 %.

Now that you have a better idea of the asset classes available, allow me to decipher which strategies works best for particular scenarios. Simply splitting your equity holdings between U.S. large-cap, U.S. small-cap, developed international markets, and emerging market stocks gives great diversification benefits however equities are considered a more volatile asset class due to sensitivity in interest rate fluctuations and economic uncertainty. 

Bonds provide both income and return on capital. Diversification can be achieved by holding a variety of U.S. government, corporate and foreign bonds. If you are worried about inflation, shorten the duration (maturity) of your holdings, which will reduce the sensitivity of the portfolio to interest rate changes. In other words, look to purchase 6 month treasury bills or 2 year notes vs. 30 year bonds.

Investing in Commodities, such as precious metals, energy, and agricultural goods, provide a hedge against inflation and also lowers the volatility of a portfolio holding only stocks. Futures contracts are used to invest in commodities, however, fair warning; these types of derivatives add additional levels of risk and complication and should only be brokered through your investment advisor.

Real estate provides a stream of income as well as property ownership. Keep in mind that if you own a house, you are already invested in residential real estate.  Although sensitive to interest rate changes, real estate is more correlated with stocks than bonds. Consider the numerous benefits of real estate – fairly predictable income (rent), tax benefits (depreciation or deduction of mortgage interest), and long-term appreciation and stability – with the current economic climate – interest rates near 30-year lows , US economy growing a measly 2% per year, and a faltering global economy – it is no wonder why more and more investors have turned to real estate for higher returns. So much so that housing now accounts for 18% of the US gross domestic product.

In general, real estate is cheap when demand is down, and demand is down when the economy is weak. Not only does the weak economy make real estate less expensive, but it also results in lower interest rates. Locking in a low rate mortgage loan would help keep the costs down and make the property more affordable until it’s time to sell. Real estate generally goes up in value when inflation begins to make itself known. So, depending on your economic outlook for the next few years, now might be a good time to invest in real estate.

I hope that what I have shared with you has been of great value. These observations and opinions are my own and stem from what I have learned and experienced over nine years by way of educational literature, private meet-up groups, numerous networking events, and, by far the most crucial and valuable means, trial and error.  Still there is so much to discuss and write considering that this topic, in itself, serves as the basis for three hundred page bibles! At the very least, herein lies the grounds and basic framework for preparing to invest and manage your own finances.




By: Joe Lawrence

Creating monthly cash flow through multifamily investing is one of the biggest keys to building financial independence. It’s a long term strategy that has been around for ages and the reason for this is because it works well. Building true wealth occurs from investing in assets that produce dividends/income each month and multifamily properties provide just that. Of course, not all investments are created equal, so consider the opportunity before deciding to “jump in”.

When deciding to purchase a rental property, you need to consider if you are buying for cash flow or for appreciation. When buying for appreciation, you are more focused on the equity the property will be building in the future, but the cash flow generated from the asset is less impressive. Whereas with cash flowing properties, the equity growth may be slow; but the cash flow is a lot more impressive. Buying a mix of both, with the focus on cash flow, will provide a balanced investment portfolio. Monthly cash flow creates financial independence and more freedom because you don’t have to work to support your living if your passive income grows large enough.

Most high cash flowing properties are found in towns that have a high population. Generally these are urban areas and preferably the population is increasing in these towns/cities. This shows positive growth and an increasing demand for your product; clean affordable housing. When investing in urban areas it’s important to study the immediate surrounding micro-neighborhood of the area your subject property is located in. For example, you should look at a two block radius and get a “feel” for the neighborhood. Try to avoid areas that have had recent crime and areas that have a lot of vacant properties. Ideally, the only vacant property on the block should be the one that you are looking to invest in.

After selecting and purchasing the property, you’ll need to add value to the property. Ideally this is done through renovating the property and creating an increase in revenue produced by the asset. For example, after fixing up the property, hire a property manager to place qualified tenants in the property to produce a monthly income. You can also consider adding a bedroom to the unit(s) to increase the rent you can collect for that area.

Now that you have added value, you can pull out the equity created by renovating and stabilizing the property. Work with a local bank that knows the area and use that equity to purchase your next property. It’s a lot of work, so consider working with partners or someone who has experience investing in multifamily properties. But after all the work is done, you can sit back and enjoy earning the dividends from your investment. With enough assets, you’ll be able to build a solid retirement portfolio!

Joe Lawrence


The recent rise in mortgage rates could shave between 0.2 to 0.3 percentage point from economic growth over the coming year, with the largest pinch being felt during the third quarter, according to an analysis by economists at Goldman Sachs.

image014The Federal Reserve surprised markets on Wednesday when it opted not to begin an anticipated wind-down of its bond-buying program. Already, expectations of a Fed pull-back had driven up the cost of getting a mortgage, which in turn has offered some evidence that the frantic price gains in the housing market witnessed earlier this year will slow.

Goldman economists tried to quantify the impact of higher mortgage rates on any slowdown in housing activity. The rise in rates, which stood at 4.75% last week for the average 30-year fixed-rate mortgage, up from 3.6% in early May, can explain “some but not all of the slowdown” in recent housing data, wrote David Mericle of Goldman Sachs.

Mr. Mericle looked at three key areas of the housing market: new construction, sales, and prices. Here’s what he found:

On new construction, the drop in rates boosted new construction by around 0.7 percentage points per month between the middle of 2011 and the middle of this year, accounting for around 9 to 10 percentage points of the 25% to 35% year-over-year growth during that span. That 9-10 point gain of the past two years could subtract around 2 percentage points from growth in construction during August and September, according to the analysis.

New home sales in July fell by 13% from June, and mortgage rates contributed around 3.5 percentage points to that drop. Goldman’s analysis implies a further 2 to 3 percentage point drop in August and September, followed by a possible rebound during the fourth quarter. The impact on existing home sales could be smaller and it could show up later in the year, the analysis found.

As for home prices, the Goldman reports said that rates have a “more persistent but more lagged impact on home price growth than housing activity growth.” Lower rates had been contributing around 0.3 percentage points to monthly home price gains, and they could now add just 0.1 percentage point to home price growth.image015

Altogether, higher rates could slow the pace at which prices rise, as buyers adjust to a slightly higher monthly mortgage payment than they would have found earlier this year. Any slowdown on sales and construction activity could subtract 0.15 to 0.2 percentage point from residential investment, a key component of housing’s contribution to economic growth, over the next year. A slower pace of home price inflation, meanwhile, could subtract 0.05 and 0.1 percentage point as a result of a smaller wealth effect, which is the process by which consumers spend more because their houses have gained value.

The longer-term case for a housing recovery hasn’t changed, the report adds, because the current rate at which households are forming suggests that 1.5 million housing units will be needed annually, well above the current level of less than 900,000.