I had a meeting with my youngest client the other day—a newly married couple in their mid-20s. They’re doing an incredible job, and I’m really excited to be part of their journey. They’re already in the second phase of wealth building, where investment returns start to play a huge role. That’s why we got into a discussion about passive or semi-passive investments that could potentially provide higher returns than the market—something that’s key to building wealth for the long term.
Some Background: Over the years of helping people build their financial success, I've come to realize that wealth building tends to happen in three distinct phases:
Now let’s dive into start of this article: passive or semi-passive investments that can potentially offer higher returns than the market—especially for those in Phase 2.
Disclaimer: This is not investment advice. The information provided is for educational and informational purposes only and should not be considered as a recommendation to buy or sell any securities. Always consult with a fee-only CFP (or CPA/PFS like myself) before making investment decisions.
First up, Growth and Tech ETFs. These exchange-traded funds focus on sectors that are booming—think technology, innovation, and the companies that power our digital world. A tech ETF allows you to invest in a broad basket of companies that are at the forefront of growth, like Apple, Tesla, and Google, without having to pick individual stocks. Over time, these tech giants can grow much faster than the market, giving you a higher chance at returns than the S&P 500. Investment horizon: 5-10 years or longer.
The beauty of these ETFs? They’re diversified, and you don’t need a Ph.D. to understand how they work! Plus, they’re passive—just set it and forget it (okay, maybe check it once in a while).
Private equity might sound like something only the ultra-wealthy get to play with, but that’s actually a myth. In recent years, opportunities have opened up for everyday investors like you (even if the price tags can still make your eyes widen!). Basically, private equity funds pool money from investors to buy into private companies-those that aren’t listed on the stock market. The goal? Helping these businesses grow big and strong. When it works, the returns can be impressive, making private equity one of the most rewarding-but also less liquid-investments out there. Investment horizon: 7-12 years or longer.
Just be aware: these investments can require a longer holding period, and liquidity can be limited. But when done right, private equity has the potential to deliver high returns and take you beyond the typical S&P 500 performance.
Venture Capital (VC) is for the entrepreneur in you! Want to get in on the ground floor of tomorrow’s tech unicorns? VC investments allow you to invest in startups. Think about all the apps, platforms, and businesses you use today that were once startups. By investing in VC, you’re betting on the next big thing—and sometimes, those bets pay off BIG. Just be aware—VC investments are high risk but can lead to out-of-this-world rewards if you choose the right ones. Insider tip: use a self-directed Roth IRA so you don't have to pay tax! Investment horizon: 10+ years.
But hey, just like any high-risk investment, it’s crucial to balance this with safer options. Don’t go betting all your cash on the next “Silicon Valley” startup! 🦄
Real estate has long been a wealth-building tool, but for those of us not sitting on a pile of cash, real estate syndications offer an attractive solution. Syndications pool money from multiple investors to purchase commercial or multi-family properties. As a passive investor, you’ll receive a share of the rental income and appreciation, without dealing with the day-to-day property management. Investment horizon: 5-10 years.
Syndications can provide consistent cash flow and solid long-term growth, especially when you invest with reliable sponsors. As with any real estate venture, do your homework. But the potential for higher returns than the S&P 500 is there.
Alright, this one is a bit more advanced, but if you’re familiar with options trading, selling put options can be a fun way to earn passive income. Here’s the deal: When you sell a put option, you’re agreeing to buy a stock at a specific price (the strike price) if the stock falls below that price. In exchange for this commitment, you get paid a premium (think of it as a fee). Investment horizon: Months to a few years.
If the stock doesn’t fall below the strike price, you pocket the premium and walk away. If it does, you buy the stock at a discount. Just keep in mind—this strategy requires understanding market movements and a bit of risk tolerance. But if done right, it can lead to solid returns.
Not all real estate is created equal. For those looking for something unique, investing in raw land or niche properties like vineyards, farmland, or even billboards can be incredibly lucrative. These types of properties often appreciate over time and can provide income streams through things like leasing or development. Investment horizon: 10+ years.
Plus, they’re a great way to diversify your portfolio. The trick is finding the right land or niche investment that aligns with your goals and risk tolerance.
Maybe tech isn’t your thing, but you still want exposure to specific industries. That’s where sector-specific ETFs come in. These ETFs focus on particular sectors like healthcare, energy, or consumer goods. They’re a great way to target industries you believe in or want to support. And the best part? You get to invest passively, with exposure to companies within that sector that might outperform the broader market. Investment horizon: 5-10 years or longer.
So, if you’re bullish on clean energy, healthcare, or cybersecurity, there’s likely an ETF for you.
One of the most reliable ways to build wealth over time is by investing in Dividend Aristocrats—companies that have a proven track record of paying and increasing dividends for 25+ years. These companies tend to be stable and offer reliable payouts, which you can reinvest to grow your wealth. Over time, this strategy compounds, leading to steady growth without having to monitor the market constantly. Investment horizon: 10+ years.
Reinvesting those dividends into the same stocks or ETFs can turn modest returns into a snowball of wealth—more so than the S&P 500’s general returns.
Here’s where we have a little fun—selling a bubble-type asset like Bitcoin before it bursts is about timing. And let’s be real: timing is really hard to do perfectly, especially in volatile markets like cryptocurrency. So, don’t try to catch the peak. Sometimes it’s better to stick with sound long-term strategies rather than chasing the next big thing. But hey, if you manage to sell at the perfect moment, kudos to you! Investment horizon: Days to immediately-Get out while you can!
When it comes to growing your wealth, there’s no “one-size-fits-all” approach. You’ve got options, and that’s the beauty of it. Whether you’re investing in tech ETFs, real estate, or niche opportunities like private equity, the key is diversification and consistency.
As a fee-only financial life planner, my goal is to help you create a strategy that aligns with your long-term vision and goals. So, what are you waiting for? It’s time to make those financial dreams a reality! 🚀
Got questions? Drop me a message, and let’s chat about how you can start applying these strategies to your portfolio!
#Investing #WealthBuilding #FinancialFreedom #MoneyManagement #InvestSmart
.png){kind=logo}
