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Until a year ago, I was an investment advisor.
Bachelors degree in Economics, Master’s in Finance, CFP track - the whole kit and kaboodle. I made a living knowing how to navigate the stock and bond market. And, all things considered, I was pretty decent at it. I was the youngest hire for my position in firm history - a firm ranked in the top 20 in the nation - before I gave it all up to go sell sneakers and hairspray on the internet.
So, as someone who spent his entire adult life dealing with the stock market, hear me when I say:
The stock market is the last place you want to put your money.
By “last”, I don’t mean “you don’t want to put any money in it”. I quite literally mean: In the chronological order of your savings, it should be the final destination for your funds; a last resort when you have quite literally too much money to deploy for a better purpose.
And there are MANY better purposes for your money than the stock market.
My general view on the proper deployment of one’s income (after meeting basic necessities) is as follows:
1. Investing in increasing your income.
2. Investing in safe, high-ROI alternative investments.
3. Investing in the stock market.
Number 1 could (and will) be its own article. Today, we will be focusing on Number 2 - and why it is more important than Number 3.
An Alternative Approach
Alternative assets can comprise a vast swath of meanings. In general, it would be most stores of value which are not equities, fixed income, real estate, commodities or cash/cash equivalents. I’m not here to argue definitions - over the course of my Monthly Alternative Asset Investment Portfolio Updates, I merely wish to highlight some less-touted investment vehicles that trounce the stock market on a regular basis.
My Alternative Asset Portfolio is comprised of things like Penny Stocks, Cryptocurrency, Private Equity, LEGOs, Comic Books and several other more niche items. Some (Bitcoin) are quite in vogue. Others (LEGO Star Wars Mandalorian Starfighter 75316) probably don’t ring a bell.
In today’s article, I wish to highlight a few that fly under the radar in most circles and make a case for investing in alternative assets before plowing all your funds into the stock market.
Below is a screenshot of the 3-month realized gains in the vinyl record allocation of my alternative investment portfolio (adjusted for sellers fees). As you can see, I am averaging a return of 93.94%, compared to the stock market’s 8.20%.
Sometimes the scope of numbers doesn’t really hit the brain to the full extent of their reality, so let me phrase this a different way.
$10,000 invested at 8% annual return for 10 years: $21,589
$10,000 invested at 94% annual return for 10 years: $7.55 Million
The Stock Market vs. My Vinyl Portfolio
If you squint, maybe you can see that tiny blue flatline, representing the value of the stock market, in comparison to the returns vinyls can provide.
Now, anyone with a subtle sense of skepticism, paired with the most remote sense of financial wherewithal, would be asking:
“Ok, well then how are you actually going to invest $7.55 million into vinyl records to garner these returns.”
Simply put: I won’t… but we’ll get to that shortly.
A Simple Formula
Please refer to my theory of the optimal flow of investment funds for any individual:
Investing in increasing your income.
Investing in safe, high-ROI alternative investments.
Investing in the stock market.
This is not a treatise on the shortcomings of the stock market, but rather an expose on more optimal investment vehicles for those with a penchant for higher alpha than what the traditional markets can provide.
More simply put:
You should invest your money in alternative assets, double that money in a year or two and invest the profits into the stock/real estate market. Then, buy more alternative assets, double your money again and start the cycle over again.
Upside
The pros of alternative assets should be readily apparent:
Higher Returns
Even if you have yet to hear of this before, investing in alternative assets such as vinyls, LEGOS, comic books and similar assets is fairly ubiquitous - with plenty of research having been conducted to validate their accumulation as a wildly profitable investment model.
I bought these Mac Miller vinyls for $55 each. They are now selling for $300 each.
You’re not going to get those returns in the stock market.
And it’s not just vinyl records. there are plenty of alternative assets classes trouncing the stock market.
If you had blindly invested into every retired LEGO set in 2021 and held for one year, you would have almost doubled your portfolio, compared to if you had invested the same amount in the S&P 500.
Lower Risk
I firmly believe that many (not all) alternative assets are a more sure bet than the S&P 500.
This is where most people would disagree… and they would be wrong.
Take LEGOs for example. You could have blindly invested in every set that retired in 2022 and already have a return of 20.4% - just 3 months into 2022.
Until 2 years ago, I had never invested in a single vinyl record. Now, I’m closing in on triple-digit YTD returns.
Even if you’ve never started before, there are a TON of resources available to show you the upcoming best buy-and-hold investments in these categories.
This is not complicated investing - especially if you have professionals telling you exactly what to invest in to make a profit.
Downside
The cons of alternative assets are fewer than you think, with there being only two major ones to name.
Scalability
You can have a $100k vinyl and LEGO portfolio… you likely would struggle to house and liquidate a $10 million one.
So then what?
Easy: You invest in the stock/real estate market!
The stock and real estate market is still the best way to generate predominately passive wealth, when dealing with sizable investable assets. You would have massive difficulty dealing with the logistics of a $5 million LEGO and vinyl record portfolio.
However, most people start with the stock market and transition to alternative assets.
You should do the opposite.
Once you have $10-100k in high-return alternative assets growing at a 50%+ annual return, you should probably take some of those profits and toss them in the stock market. It’s wise to diversify your holdings and also not run into a stepwise bottleneck in your scaling efforts.
While I know people with warehouses/storage units for their alternative asset portfolio, I don’t love the idea of 7 figures of collectibles being burnt, flooded, stolen, etc. (even though you can easily insure your holdings for a nominal fee). I’d rather have that money sitting in a brokerage account and be ok with $50k or so of collectibles chilling in my basement or a storage center, knowing that I will sell them for double that in a year or two and put the profits back into the market.
Higher Risk
No, this is not a typo. Sure, I literally just said alternative assets are less risky than the stock market.
That only applies if you’re not an idiot.
Here’s a quick litmus test. You are an idiot if:
You have no clear investment strategy backed by historical data and forward-looking analysis.
You’re unwilling to pay (albeit minimally) for that data/information.
The stock market is easy. Just invest in an S&P 500 index.
Alternative assets are not the same. It’s only easy returns if you’re following some sort of playbook. You can’t buy every vinyl at Barnes & Noble and hope to profit.
Hope is not a plan. Data is.
Where To Get Data
There’s a few places you can go to find out what items are going to be the best investments over the coming 3-18 months.
Specialized Communities
In my opinion, this is the absolute best place to get information. A community specializing in the resale of these alternative asset classes will have full-time experts in a variety of categories sharing their picks.
The one below only costs $69.99/mo and shares dozens of profitable short and long-term plays every single day. If you have a pulse and the tiniest bit of motivation, it will pay for itself 10x or 100x over every singly month.
You Can Join This Group Here to get in on the action and see dozens of profitable alternative investments every single day.
Brick Economy
This one only applies to LEGOs but is still a solid resource. Brick Economy is a website showing LEGO sets expected to retire soon. As stated, retiring LEGO sets are one of the best alternative asset classes to invest in, and - while not as comprehensive as a specialized reselling community - BrickEconomy is still a great gauge of a potential investment opportunity in the LEGO market.
Trust Your Gut And Go It Alone
Yes, I’m being facetious, but this is what 90% of people do. Whether it’s stock trading or drop-shipping or Amazon FBA or - in this instance - investing in alternative assets like Vinyls and LEGOS… almost everyone would rather save money now (by not investing in the right data) and lose money later than spend money now to make a ton more later.
If that’s you, I’ll save you the trouble:
Stick to your 8% returns in the stock market, because you won’t be seeing the 94% returns that I see in my vinyl portfolio. If a $30 subscription to a reselling community or 2 hours spent reading up on seasonal LEGO trends is too high a barrier to entry for you, you’re never gonna make it no matter what industry you’re in.
Conclusion
I am steadily averaging returns of 90%+ in my alternative asset portfolio - with less risk than the stock market. And I’m not an anomaly. I know plenty of others who do the same through investing in vinyl records, LEGOs, comic books and similar items.
All it takes is:
Invest in the right data. This is neither the cost nor time commitment of a college degree. I am referring to $30 and maybe 3 hours of work per month to fill your alternative investment portfolio with the right alternative assets that will demolish the stock market.
Keep tabs on trends. The experts in your community will give target hold times, but you still want to make decisions yourself. As you can see in my vinyl portfolio, I had a few losers, but only one of them set me back more than 4%. Cut your losers quickly, rather than trying to hold on for a rebound. And let your winners ride. The Mac Miller vinyls have risen in value 600% since I bought them. I still haven’t sold, because I think they’ll keep going up.
Network with others in the game. This isn’t a zero-sum game like trading is. Talk to others in your resale community to keep learning about new opportunities in this space, upcoming releases, newly retired LEGO sets and more. The reason you can outperform the stock market in this space is because of an information asymmetry. If you know something other people don’t (when/where hot items are releasing, how to secure these LEGO sets on sale, etc), you can win. Knowledge is power and other people are your ticket in.
The key to outperforming the stock market is knowing what to invest in, where you can buy it and when it will become available.
Those three factors are the difference between 8% returns and 80% returns.
Have questions or comments? Leave them below.
Here’s how I can help you make money online:
If you want to make money selling on Amazon, eBay, wholesale or investing in alternative assets such as LEGOs, vinyls, comics and more, you can:
Join the Divine Reselling Discord for about $2/day to get started. Dozens of profitable item leads posted every single day.
If you’d prefer an online course to a Discord community, you can learn from The FBA Roadmap Online Course instead (or join both)!
If you are interested in accessing:
My personal Alternative Asset Portfolio
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