A savings account has its place in securing your emergency funds.
But if all of your cash is stowed away in savings for a rainy day, you aren’t taking advantage of the opportunity to optimize this cash and work it to its full potential.
In today’s market, an investment portfolio must contain a diverse range of assets and opportunities.
Let’s look at the three reasons why you shouldn’t keep your money in a savings account—and what you should do instead.
Let’s Start Investing
Reason 1: Inflation erodes your savings
Your purchasing power decreases in periods of high inflation.
If the interest earned on a savings account is lower than the inflation rate, the real value of savings decreases.
This means that while money might be growing in the account as you add to it, its ability to purchase the same basket of goods and services diminishes.
Saving for retirement, education, or major life events may require a more robust strategy to ensure that the accumulated funds retain their value over time.
Reason 2: You’re not diversifying your investments
Diversification is a fundamental investment strategy that involves spreading investments across different asset classes to reduce risk.
By avoiding reliance on a single investment type, investors can increase the potential for long-term returns while mitigating the impact of poorly performing assets.
Savings accounts may offer security, but relying solely on them to grow wealth exposes investors to certain risks.
Recognizing the limitations of a savings-centered approach will help you to effectively allocate your resources across various opportunities.
Reason 3: You’re not getting any tax breaks
Savings accounts often come with limited tax advantages.
The interest earned in these accounts is typically subject to ordinary income tax rates, potentially reducing the after-tax returns.
This limitation prompts investors to explore alternatives that offer more favorable tax treatment.
What to do with your money instead of putting it in a savings account
The appropriate amount of cash to keep in savings varies depending on individual circumstances and needs.
Work with a financial advisor to determine this ideal “buffer” amount, so you know how much is safe to allocate elsewhere.
The following strategies will help you maximize your savings.
Diversify
Diversification is the foundation of a sound investment strategy.
By spreading investments across a range of assets, investors can mitigate risk and minimize the impact of underperforming sectors or specific market fluctuations.
Diversified portfolios are proven to be more resilient, and provide long-term stability and growth.
Today’s market requires a mix of traditional investments such as stocks and bonds as well as unique alternative investments.
Explore alternative investments
Alternative investments refer to a broad category of options that extend beyond stocks and bonds.
These alternatives often have unique characteristics, structures, and risks compared to more conventional investments.
Alternative investments can provide portfolio diversification, enhance returns, and offer exposure to different market segments.
Common types of alternative investments include:
- Real estate
- Private equity
- Private debt
- Hedge funds
- Physical commodities such as gold
- Collectibles and art
Investors have the freedom to customize their portfolios based on their specific goals, interests, and preferences.
Stay informed and adjust as necessary
Remain informed by regularly assessing:
- Market trends
- Economic conditions
- Potential investment opportunities
This will help you to be proactive in adjusting your investment strategy to align with your changing goals and circumstances.
What are private mortgage REITs?
Real estate is a lucrative alternative investment, but investors who aren’t interested in managing properties have an alternative in the form of private mortgage real estate investment trusts (mREITs).
Private mREITs are a type of investment vehicle that focuses on mortgage-related assets, primarily investing in mortgage-backed securities or property mortgages.
Like traditional REITs, private mREITs generate income primarily through interest payments on their mortgages.
This alternative investment is gaining popularity among those who want to bring stability to their portfolio and keep investing in real estate without having to manage properties themselves.
What are the advantages of private mREITs?
Private mREITs are a superior alternative investment with the following benefits.
Diversified holdings
Private mREITs result in diversified portfolios that include a variety of properties.
This diversification can help mitigate risk by spreading investments across different types of mortgages and real estate debt instruments.
Investors can benefit from exposure to a range of assets within a single investment vehicle.
Steady passive income
One of the primary attractions of private mREITs is their ability to generate a steady stream of passive income.
These trusts distribute a portion of their earnings to investors in the form of dividends.
For income-focused investors, this reliable cash flow can contribute to regular income without active management.
Tax benefits
Tax benefits for private mREITs include pass-through deductions and qualified business income deductions.
With Marquee Capital Fund 1, investors can deduct up to 20% of dividends received, meaning they only pay taxes on 80% of dividends earned.
Real estate exposure—without the headaches
Investing in private mREITs allows individuals to gain exposure to the real estate market without the burdens of direct property ownership.
Unlike being a landlord, investors in mREITs don’t need to deal with property management, maintenance issues, or tenant concerns.
This indirect real estate exposure offers the potential for passive returns without operational responsibilities.
Start investing with Marquee Funding Group
If you want to do more with the money in your savings accounts, Marquee Funding Group can help.
Our investor fund offers the following benefits:
- Long-term, reliable cash flow
- Sound real estate investment
- Risk mitigation and security
- Better returns than stocks
- Unique tax benefits via the Qualified Business Income Deduction
Our mortgage REIT funds private loans that are flexible but not speculative.
Rather than close and churn deals, we finance responsible investments with an 8% preferred return.
Marquee was founded on relationships and a passion for private real estate lending that has exceeded 30 years in the business.
Start investing with Marquee today.
