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Mark Cuban, the outspoken owner of the Dallas Mavericks, is a man with a reported net worth of more than $5 billion. He’s also an investor many pay close attention to.
His comments on diversification, for example, have challenged the popular wisdom of many other notable investors, such as Warren Buffett.
In the past, Buffett has argued that “diversification is a protection against ignorance.” This advice is highly valued by investors looking to take a more passive approach. Those that don’t want to invest the time as well as the money in picking stocks can rely on index funds (which track the movements of the overall market and provide diversification), effectively removing the need to understand stock performance.
Mark Cuban, on the other hand, has said that he believes diversification is “for idiots” and that buy-and-hold investing is a “crock.” It’s a strong take, but one many professional money managers stand by when looking to beat the market (making concentrated bets that are right are usually required to beat any benchmark).
However, Cuban’s appetite for risk is larger than most. In fact, as a longtime investor on Shark Tank, he recently admitted that his investments in the shows’ featured businesses has cost him $20 million.
For those who are more conservative with their money, let’s look at a few asset classes, and how to achieve diversification to mitigate risk.
In a 2017 report from Cambridge Associates, diversification was shown to be the more reliable option:
“Diversified portfolios still prevail over the long term… if those investors with highly diversified portfolios had abandoned that approach during the bull market of the 1990s, they would have earned lower long-term returns and have smaller portfolios today as a result.”
Clearly, Buffett’s long-range view is borne out by the market’s history.
Those looking to take the Warren Buffett approach to investing may consider buying index funds that track total market indices around the globe. That’s about as close to true diversification as one can get.
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Read more: Rich, young Americans are ditching stocks — here are the alternative assets they’re banking on instead
For many investors, finding alternative asset classes outside of the stock market can be a great place to start diversifying.
Real estate is a common alternative to the stock market, but owning a property and managing tenants can make this asset less appealing to those looking for a passive income stream. Residential real estate is also an option for diversifying your portfolio.
While high home prices and mortgage rates can make buying less appealing, prospective homebuyers are not the only ones sweating housing prices — rental prices are also high. According to Realtor.com, in April 2024 the median rent price for a two bedroom unit in the U.S. was $1,916.
Now, investing platforms are making it easier than ever to tap into the real estate market.
For accredited investors, Homeshares gives access to the $36 trillion U.S. home equity market, which has historically been the exclusive playground of institutional investors.
With a minimum investment of $25,000, investors can gain direct exposure to hundreds of owner-occupied homes in top U.S. cities through their U.S. Home Equity Fund — without the headaches of buying, owning or managing property.
With risk-adjusted target returns ranging from 14% to 17%, this approach provides an effective, hands-off way to invest in owner-occupied residential properties across regional markets. If you’re not an accredited investor, crowdfunding platforms like Arrived allow you to enter the real estate market for as little as $100.
mogul is a real estate investment platform offering fractional ownership in blue-chip rental properties, which gives investors monthly rental income, real-time appreciation and tax benefits — without the need for a $250,000 down payment or 3 A.M. tenant calls.
Founded by former Goldman Sachs real estate investors, the team hand-picks the top 1% of single-family rental homes nationwide, guided by proprietary underwriting and market analytics typically used by large institutions.
Each property undergoes a vetting process, requiring a minimum 12% return even in downside scenarios. Across the board, the platform features an average annual IRR of 18.8%. Their cash-on-cash yields, meanwhile, average between 10-12% annually.
Every investment is secured by real assets, not dependent on the platform’s viability. Each property is held in a standalone Propco LLC, so investors own the property — not the platform. Blockchain-based fractionalization adds a layer of safety, ensuring a permanent, verifiable record of each stake.
Getting started is a quick and easy process. All you need to do is sign up for an account and then browse available properties. Once you verify your information with their team, you can invest in the properties of your choice in as little as 30 seconds.
If you’re searching for an investment that offers both stability and potential for tempting returns, commercial real estate might be the answer. Unlike the stock market, which can be highly volatile, commercial real estate provides steady income streams with generally lower volatility and a low correlation to the S&P 500, according to Nareit data.
First National Realty Partners (FNRP) allows accredited investors to access institutional-quality commercial real estate investments — without the leg work of finding deals yourself.
FNRP — one of the fastest-growing private equity firms — specializes in grocery-anchored commercial real estate. The firm has developed relationships with the nation’s largest essential-needs brands, including Kroger, Walmart and Whole Foods, and provides insights into the best properties both on and off-market.
FNRP’s secure online platform makes investing in commercial real estate convenient and simple. You can engage with experts, explore available deals and easily make an allocation, all in one personalized portal.
For those looking to further diversify like a billionaire, investing in blue-chip contemporary art is also an option worth considering.
Over the past 25 years, contemporary art has outpaced the S&P 500 in performance making it a unique opportunity to diversify your portfolio outside the stock market.
Masterworks knows the power of art investing. Their platform offers 900k+ investors the opportunity to invest in this asset class as part of their overall portfolio strategy. When Masterworks sells a painting – like the 23 it’s already sold – investors reap their portion of any profits.
In fact, from their 23 exits so far, Masterworks investors have realized representative annualized net returns like +17.6%, +17.8%, and +21.5% (among assets held for longer than one year).
It’s easy to get started, but offerings can sell out in minutes. Skip the waitlist and get started in diversifying your portfolio today.
No matter what kind of investor you are, one thing remains true: having a team to advise you on key investing decisions is a good move. Both Buffett and Cuban have experienced teams behind them, supporting their decision-making processes and providing key functions that a single individual simply can’t possibly accomplish on their own.
If you’re unsure which path to take amid today’s market uncertainty, it might be a good time to connect with a financial advisor through Advisor.com.
This online platform connects you with vetted financial advisors best suited to help you develop a plan for your new wealth.
Just answer a few quick questions about yourself and your finances and the platform will match you with an experienced financial professional. You can view their profile, read past client reviews, and schedule an initial consultation for free with no obligation to hire.
You can view advisor profiles, read past client reviews, and schedule an initial consultation for free with no obligation to hire.
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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
