According to US News and World Report, the #1 best job in America is a software developer. It joins three other tech jobs in the top ten list for 2023. Over time, these jobs lead to executive responsibility and, often, equity participation in technology companies.
These highly profitable ventures often lead technology professionals to believe that they have the “magic solution” to making money and they commit their capital to other technology ventures. Often these are with friends or past colleagues.
Forget that 9 out of 10 tech startups fail. Fully 75% of venture-backed tech startups fail as well. These are companies that have been vetted by the best minds in the industry, giving consideration to market, marketing, team composition, tech challenges, financing, operations, and legal issues.
But successful technology executives often imagine they can read the tea leaves better than a lay person and put their capital resources into tech that they understand. Most of them will lose money. That is an empirical fact.
Looking at investment allocation trends, middle income investors (< $471K net worth) tend to have most of their investment in retirement accounts and securities, with less than 8% in real estate (excluding their personal residence). Upper income ($471K – $10.3M) adjust the composition to as much as 25% of their portfolio. The ultra rich ($10.3M+) often see real estate exceed 40% of their investment portfolio.
Real estate does not often offer the hockey-stick growth that a tech startup can achieve. But, it also rarely goes to zero, which many of those 90% failed startups do.
A REIT (a Real Estate Investment Trust) offers a great way for a tech executive to diversify some of their capital out of the market. REITs are managed investments that provide a completely passive way for an investor to gain the benefit of real estate ownership without the hassles of becoming a landlord.
When considering a REIT investment, you should consider the vertical niche the REIT prioritizes, the fees assessed by the management company of the REIT, and the past performance of the REIT as related to its plan for the future.
Regardless, any successful tech executive should model what the wealthy and uber-wealthy practice in their portfolios and add more real estate to provide a firm foundation to their portfolios as uncertain market conditions approach.