Have stocks to cash out? What do you do with that money now?
There appears to be a substantial if not record number of startup founders and workers who are enjoying massive wealth creation in either exiting their companies or accumulated value in stock options in the face of an anticipated acquisition or IPO. The markets seem hungry for new M&A deals, companies going public with huge valuations, and to buy shares in private startups before they mature.
So, whether you recently sold your company for stock or have a piece of a highly valued company and are considering cashing out while the going is good, what do you do with it?
Diversify & Invest It
That shouldn’t soak up much of your newfound wealth. Even if you want to start a new business you can always raise funding and probably won’t want to put all of your cash on the line by yourself.
That means a lot of capital left to be invested.
The keys here are:
- Diversification from exposure to stock market volatility and contractions
- Preservation of your newfound wealth
- Ongoing passive income that is reliable
- Yields which will keep you ahead of taxes and inflation
- Multiplying that wealth at a reasonable rate, without unnecessary risk
Why Real Estate Rocks
Given this checklist of what you want in an investment, this is not a combination of factors you are likely to find in stocks, bonds, metals or crypto. They are either too risky, low yielding with little growth potential or don’t produce income.
In contrast, real estate offers passive income potential, tax benefits, high yields and the safety of a solid asset.
It’s also an asset class that you already have some familiarity with. Whether it was crashing on a couch with your startup team crammed into a studio or sleeping in the office because rents were too expensive, or you’ve had to carefully strategize where to locate offices and teams where they can afford the rent. Or maybe you’ve bought your dream home. All of these give you some familiarity with real estate and the needs and challenges.
How To Do It
Investing in real estate with the windfall you get cashing out your stock doesn’t have to be buying your own private island, self-managing Airbnb condos or swinging hammers and flipping houses on the weekend. It doesn’t have to be an ambiguous real estate stock without the benefits of direct ownership either.
It can be investing in income-producing properties or value add properties for wealth building and cash flow and having them professionally managed.
Be sure you’ve explored some of these options before you park that money.