Why and How to Diversify Your Investments: Key Takeaways from Garrett Perez, Tax and Wealth Advisor for High-Net-Worth Individuals

by Erik Hayden, on May 5, 2020 11:32:30 AM

Is the midst of a pandemic and market upheaval a good time to change up your investment strategy – or should you hold tight? 

Garrett Perez, partner and co-founder at Pinnacle Peak Advisors LLC, shared his insights during our latest Expert Series webinar last week.

If you missed our live webinar, you can still watch it above.GarrettHeadshot

 Here are the four key takeaways from the webinar: 

  1. Why should you diversify your investment portfolio now?

    Garrett recommends against holding a portfolio that’s entirely comprised of investments that are subject to everyday stock fluctuations. In fact, the first thing Garrett tells his new clients to do is review their balance sheet and consider the composition of their current portfolio. Are 100% of their investments in stocks? Or do they have a mix of alternative investments like real estate holdings?

    “I think many people are surprised to see that they are so heavily concentrated in one position,” Garrett says.

  2. Opportunity Zone Funds make it easier to invest in real estate, which can be a powerful long-term diversification strategy.

    Garrett points out that investors might be tempted to diversify by investing in the institutional safety of the U.S. Treasury Bonds. It’s a common strategy when the market is unstable. However, he also says current yields for 10-year Treasury Bonds are very low – between 0.60% and 0.66% (at the time of the webinar). Compare that to the average historical returns on traditional real estate – between 4% and 6%. Ground up development typically has even higher returns.

    Because Opportunity Zone Funds invest in long-term real estate projects, they are insulated from short-term stock market turbulence.

  3. If you’re sitting on IPO shares, today’s your day to diversify. The clock is ticking...

    2019 was an extraordinary year for IPOs, and Garrett is seeing tons of Silicon Valley clients with highly concentrated stock positions because of it. If you are one of the many tech company employees, early investors, or partners holding onto incentive stock options, now is a great time to diversify.

    When you exercise those options, you’ll be on the hook for capital gains taxes unless you roll over those gains in a tax-deferred investment such as Opportunity Zone Funds.

  4. Take advantage of new deadline extensions to invest in OZ Funds

    Mark your calendar for July 15, 2020. Here’s why: 

    Typically, investors have 180 days from the date of their sale of a business, stock, or property to invest their capital gains into an Opportunity Zone Fund. But meeting that deadline has been challenging for some investors because of delays and market uncertainty caused by the spread of COVID-19.

    Fortunately, the IRS issued an extension to parties who had a capital gains event on or after Oct. 4, 2019. They can invest in an OZ Fund as late as July 15, 2020, if their original 180-day deadline occurs between April 1 and July 15, 2020.

Have more questions or interested in learning more? Contact us today! 

                        

Topics:Opportunity ZonesSan JoseSilicon ValleyOpportunity FundUrban Catalyst