How to Diversify Your Portfolio by Age (With Real Estate)

Diversification is key to building a strong retirement portfolio. Learn how Capstone Capital Partners can help add real estate to your investments.

This article will discuss how to diversify your investment portfolio over the years, starting around the beginning of adulthood and continuing past the retirement age. We’ll also explain how a hard money lender like Capstone Capital Partners can help at each step along the way.

We are making several assumptions for this article:

• You will retire at age 67

• You will maintain a conservative investment portfolio strategy over the course of your life

• Your primary investment goal is to build retirement savings

This last point is important. People do not have nearly as much saved for retirement as we might like to think. The median 401(k) balance for Americans over the age of 65 in 2023 was $70,620. The average monthly Social Security retirement payment was $1,767.03 as of December 2023. Only about 10% of retirees have at least $1 million saved. The sooner you can start building a diversified retirement portfolio, the better.

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Ages 20 to 45

Broadly speaking, one can sort investments into the following categories:

• Active vs. passive investments

• High-risk, high-reward investments vs. lower risk, smaller yield

The younger you are when you start building your retirement portfolio, the more you might be willing to take risks and take an active role in your investments. If a risk doesn’t pay off, you won’t lose everything because you’ve diversified your portfolio. You will also have time to build your savings back up since retirement is still decades away.

Examples of non-real estate investments that often involve high risk include volatile assets like stocks and cryptocurrency. In the real estate world, fix-and-flip projects are often high risk with a potential for significant returns. They also tend to be very hands-on. Fix-and-flip investors are often right there, either doing the renovation work themselves or managing the contractors and subcontractors.

This is not to say that fix-and-flips are exclusively a young person’s game, but it helps to have energy and enthusiasm for a project. People in their 20s have an opportunity to start small, such as with a small residential property, and learn as they go. Capstone offers hard money loans for fix-and-flip projects. They can also contribute their institutional knowledge to new investors, based on years of experience in hard money lending.

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Ages 45 to 55

You might be starting to feel the years once you reach this age bracket. Perhaps your back hurts more and your bedtime is earlier than when you were younger. If you’ve started a family, you’re probably thinking about your financial needs in the here and now, not just the future. Active investments and big risks might not seem quite as appealing anymore, but you’re not out of the game yet.

Hopefully you have some years of investing experience under your belt by now. You could be in a good position to take some big swings. Perhaps you’ve graduated from small residential fix-and-flips to larger projects, such as multifamily residential or commercial. Your hard money lender can help you take for investment portfolio to the next level. Just remember to keep it diversified.

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Age 55 to retirement

As you get older, active and high-risk investments lose their lustre. The closer you get to retirement, the less time you have to make up for investments that didn’t pay off. Now that retirement is around decade or less away, it could be time to change strategies.

You can move from stocks to bonds. While the payouts are lower with bonds, they are guaranteed by law. You can also look to longer term, lower reward real estate investments. Long-term rental properties, for example, can provide stable revenue along with appreciation in  value. Capstone doesn't provide long-term loans, but they can provide short-term financing while you look for a permanent loan.

As you approach retirement, you want to shift your portfolio toward reliable assets with consistent returns. You probably also want those investments to be more passive than the investments of your youth. Capstone has you covered.

Entering retirement

Capstone offers stable and exciting opportunities for those who are nearing or in retirement. These opportunities are not only for the retiree demographic, but many retirees are attracted to them because they’re relatively easy to understand.

• Capstone's Growth Fund: Investments in our private real estate debt fund are very passive. Investors contribute to a fund that we use to make hard money loans for the kinds of projects you might have been doing at a younger age. You receive payments at a set rate over the life of the loan, followed by the balance of your investment at the end of the loan term.

• Fractional Loan Program: While not technically an “investment” like a fund or stock, you can take a more active role in deciding where to put your money with Capstone’s Fractional Loan Program. This program allows you to be the lender without having to deal with administrative tasks like collecting payments. 

We’ll send you information on all our active projects and you can select where to lend. You own a portion of the debt in a first lien position which gives you the right to receive prioritized interest payments.

These programs are particularly attractive to retirees since they handle real, tangible assets with the assistance of a personable and trustworthy team.

Capstone supports retirees like you through asset-based real estate loans

Capstone Capital Partners is a family-owned firm you can count on. The majority of our investors and lenders are long-term clients and friends. We target steady returns through dependable Texas real estate. It’s also important to note that only about 2% of our funded deals end in foreclosure. Your investment is our investment.

We’re more than happy to discuss our offerings over the phone and in person. Start now by answering a few questions about yourself and your goals. We’ll reach out with information about active projects and what may work well for you!