Which deal should I invest if I only have limited capital

Updated: Aug 17, 2021

Happy weekend, Sharpe Investors!

This week, we held our first LIVE Q&A of ATM deal. In this section, we let data do the talking, not our opinion. Data show what actually happened; while opinion is our explanation/interpretation/understanding of what happened. The earth revolves around the sun, regardless whether I understand or not. Similarly, history going back to 1950 shows that the growth rate of demand for cash was positive all the time except for one year. Actually, the growth rates were usually between 5% - 10% per year. This holds true for economy downturn (chart 1, highlighted in grey), COVID (chart 1, highlight in light yellow) and technology innovation periods (chart 2, highlighted in red). The data clearly proves that cash is NOT dying. If you are interested to know more, you can send us an email or schedule a call on calendly (see the end of the email)

Chart 1 Annual growth rate of cash demand in crisis and COVID period



Chart 2: Annual growth rate of cash demand and technology innovation

Opportunity cost This week, we are going to talk about a simple concept called “opportunity cost”. Every decision you make, there is a hidden cost associated with it. If you have two options, A and B, and you choose A, your opportunity cost of choosing A is the potential benefit of choosing B. Realizing every time you say “yes” to something, you also say “no” to something else simultaneously. The concept of opportunity cost forces you to compare the benefit of A and B, and make sure you choose the one with greater benefit. How to apply “opportunity cost” concept to investing You might have plenty of money, but before making every investment, ask yourself: “If I only have limited capital, which deal should I invest? Which deal should I give up?“. This question forces you to compare deals on apple-to-apple basis. This was the exercise I did before I invested in ATM. The 3 short videos below show the apple-to-apple comparison of cash flow, various returns (unlevered/levered before/after-tax return), and average payback period for stock, US treasury, multifamily and ATM. Apple-to-apple comparison of cash flow: https://youtu.be/BX-MgtBsDv0 Apple-to-apple comparison of various returns: https://youtu.be/7aU8-ahw_ck Apple-to-apple comparison of average payback period: https://youtu.be/rqpvpMic2GU Different people care about different aspect of the deal. Pick the winner in that aspect, and give up others. If you keep doing this, you will end up always making the best investment. If you are interested to know more about the ATM deal, you can reach out to us. July raise is closing on 7/15. Grab the opportunity to invest in a recession-resistant asset class, with 21% cash-on-cash return and you don’t have to pay any tax for the first ~50k distribution. Oh, did I mention there is no leverage at all, so the risk is much lower than the majority of the real estate deals, which typically have 60-80% loan? See you there!

Invest with Confidence.

Yan Yan Sharpe Investor Group www.sharpeinvestorgroup.com

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