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In our latest video, "Where Do Millionaires Bank? (Top 5 Most Trusted Banks 2024)," we explored the banks most commonly used by affluent investors. While these institutions offer security and convenience, the reality is that investors rarely let their capital sit idly in a savings account. Instead, they employ strategic moves to put their money to work.
Understanding where capital is being allocated provides valuable insights into current investment strategies and market trends. According to the 2024 Capital Market Assumptions report by Wealthspire Advisors, the investment landscape is shifting, with several notable trends and opportunities:
Market Trends and Observations
A Flatter Frontier: The report highlights a “flatter” efficient frontier, indicating less reward for taking on additional risk. This change suggests that investors may need to be more discerning in their risk management strategies. A flatter frontier typically means that the marginal benefit of taking on extra risk is diminishing.
Stocks vs. Bonds: With bond yields rising and stock market valuations high, the relative attractiveness of these asset classes has shifted. Although equities continue to offer long-term returns, the gap between the expected returns of stocks and bonds has narrowed significantly. This is a departure from previous years where equities had a clearer edge (Marcus & Millichap).
Municipal Bonds: These bonds have become a focal point for investors looking to optimize after-tax returns. Despite lower relative value compared to historical averages, they remain a crucial component of a diversified portfolio, especially for those seeking tax efficiency. The current economic environment has pushed yields higher, making bonds more attractive compared to previous years (Dealpath).
Equity Markets: The influence of the "Magnificent 7" (#Apple, #Nvidia, #Amazon, #Microsoft, #Alphabet, #Meta, and #Tesla) on the S&P 500 has led to a highly concentrated market. However, this concentration also means that small and mid-cap stocks can potentially present attractive opportunities due to their lower valuations and potential for growth.
Private Markets: Expected returns in private equity and private credit have shown stability, making them attractive options for investors who can handle illiquidity. These strategies offer a more favorable risk-reward tradeoff compared to public markets.
Strategic Asset Allocation in 2024
Capital in 2024 is being allocated across a diversified range of traditional and alternative investments. Here are key asset classes to watch:
Private Real Estate: As the CEO of Blue Lake Capital, where we focus on multifamily investments, I’m admittedly biased. However, there’s a reason real estate is favored among the wealthy, and always will be - it offers compelling opportunities for growth and wealth creation. In addition, private real estate can provide a strong buffer against market volatility and inflation.
SMID Cap Stocks: These stocks present a balanced approach, combining stability with growth potential, making them a prudent choice for value-conscious investors. Recent market conditions have highlighted the potential for growth in this sector (Dealpath).
Taxable Bonds: Given the low value of municipal bonds relative to treasuries, a higher allocation to taxable bonds might be appropriate. These bonds have become more attractive with rising yields, offering better returns than in previous years.
Cash and Inflation: Elevated interest rates have improved the return potential for cash holdings, though investors should be cautious not to over-allocate. Cash holdings can provide liquidity and flexibility in uncertain times (Marcus & Millichap).
Multifamily Investments: A Key Component of Diversification
In addition to these strategies, multifamily real estate remains a vital part of a diversified investment portfolio. Blackstone's recent $10 billion investment in this sector underscores its potential for stable, long-term returns. Multifamily properties offer cash flow, appreciation potential, and resilience during economic downturns. For more insights on multifamily investments and their benefits, check out our detailed analysis in our blog post Blackstone's $10 Billion Bet and What It Means for Investors.
Multifamily real estate continues to be a dominant focus for investors, driven by strong long-term fundamentals. Experts anticipate approximately 500,000 to 750,000 new multifamily units will be delivered by mid-2025, reflecting ongoing demand and new supply entering the market. This sector remains resilient despite economic fluctuations, offering stability and attractive returns compared to other real estate asset classes (Dealpath) (Marcus & Millichap).
Current Capital Allocation Trends
In 2024, significant capital has been allocated to various sectors, influenced by federal initiatives and market conditions. The Bipartisan Infrastructure Law has funneled substantial investments into infrastructure projects, including $66 billion for rail, $25 billion for airports, and $17 billion for ports and waterways. Additionally, nearly $200 billion has been distributed across over 20,000 projects (The White House).
The startup funding landscape has been mixed, with notable investments in AI, healthcare, energy, and robotics despite an overall cautious tone among investors. Early-stage funding has seen growth, particularly in sectors like electric vehicles and green energy, highlighting areas of robust investor interest (Crunchbase News).
Final Thoughts
By following the money and understanding where capital is being strategically deployed, we can gain insights into optimizing portfolios. The dynamic nature of the 2024 investment landscape suggests that a balanced approach, leveraging both traditional and alternative asset classes, may be key to achieving long-term financial goals. As always, be sure to consult with your financial advisor or CPA to evaluate the best approach for you.
For a deeper dive into these trends and more detailed insights, you can access the full Capital Market Assumptions White Paper 2024.
P.S. If one of your priorities, like mine, is building and preserving your wealth through multifamily real estate investments, click here to download my new eBook: The Ultimate Guide to Creating & Preserving Your Wealth.
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Invest With Blue Lake Capital
If you are an accredited investor interested in learning more about passively investing in multifamily properties, click here to complete our investor form and schedule a call with our Investor Relations team.
About Ellie Perlman
Ellie Perlman is the founder of Blue Lake Capital, a commercial real estate investment firm specializing in multifamily investing throughout the United States. At Blue Lake Capital, Ellie partners with both institutional and individual investors to grow their wealth by achieving double-digit returns by investing alongside her in exclusive multifamily deals they usually don't have access to.
A defining factor of Blue Lake Capital’s strategy is founded in utilizing machine learning/artificial intelligence throughout the course of all acquisitions and asset management. This advanced technology enables the company to produce accurate and data-driven forecasting for all assets on a market, property, and even tenant basis. In doing so, Blue Lake is able to lead commercial investments with the full capabilities of today’s technology.
Ellie is the founding host of REady2Scale, a podcast that highlights the assets, processes, and strategies for the multiple approaches to successful real estate investing.
She started her career as a commercial real estate lawyer, leading real estate transactions for one of Israel’s leading development companies. Later, as a property manager for Israel’s largest energy company, she oversaw properties worth over $100MM. Additionally, Ellie is an experienced entrepreneur who helped build and scale companies by improving their business operations.
Ellie holds a Masters in Law from Bar-Ilan University in Israel and an MBA from MIT Sloan School of Management.
You can read more about Blue Lake Capital and Ellie Perlman at www.bluelake-capital.com.
*The content provided on this website, including all downloadable resources, is for informational purposes only and should not be interpreted as financial advice. Furthermore, this material does not constitute an offer to sell or a solicitation of an offer to buy any securities.
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