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Investing in Alternative Assets on Republic

February 3, 2020

by — Posted in Brokerage, Finance, IRA, Tax Advantaged Accounts

Republic is a democratized investment platform that enables anyone to invest in certain startups (and not just “accredited investors” who have 1M+ in assets to burn). In the time since the 2012 JOBS ACT was passed into law, the market for alternative investments has really exploded in size and in general accessibility. If you’re looking for decent long-term/high-risk investments in growing companies, you could do a lot worse, and I think Republic offers a compelling value proposition for young companies and small investors. I think of it as a place to buy lottery tickets; I like to bet on good business ideas succeeding and help make it happen. Maybe it’ll even pay off.

On that note, I think think it’s important to say that a lot of the “investment” opportunities you see floating around online in google ads and on facebook are risky; have questionable operations; and seem likely to go down in flames [Cadre listings, Worthy Bonds]. Republic does a fairly good job of filtering out some of the less-serious entrants and provides a solid platform for managing crowdfunded SAFE (Simple Agreement for Future Equity) holdings. They definitely let some crazy companies with crazy plans on the platform (drone delivery, crypto wallets, etc) but they are all fairly serious about what they’re trying to do and have a minimum of due diligence done before you even encounter a listing. I don’t invest in those. I go for companies I knew about before they listed on Republic and believe in. Usually fin-tech startups. There’s a lot that we can improve about banking and investments with modern technology platforms. The banks are slow to respond. There’s clearly some room for new players there.

One of the really interesting companies I’m investing in [Feb 2020] through this platform is RocketDollar, a self-directed IRA and i401k startup. Self-directed meaning that you can buy anything with your tax shielded money (as long as the IRS hasn’t explicitly ruled it out, anyway. If only I could set up my own S-Corp within an LLC owned by my retirement account…).

I don’t think RocketDollar is a terribly risky bet because the market they are addressing is huge and they are a low cost entrant in the space. I’ve always been really annoyed by the bad fund choices and high fees in most small company 401k plans but I wasn’t able to do anything about it and actually use my money in a productive way. And for some people, I think limiting choice is a good thing. But I resent having some third party firm tell me what I can and cannot buy with my own money. If I want to buy an apartment complex inside my IRA, shouldn’t I be able to do that? (and I do NOT want to do that lol. REITs are totally my jam). Shouldn’t I be able to buy bitcoin (Bitcoin sucks, but you get the point)? There’s immense value and opportunity in being able to spend your retirement money on alternative investments that are hard to value at tax time and therefore hard for a brokerage to offer for a low cost.

The market opportunity is there and it has been left unaddressed by larger firms because it’s just so hard to deal with and most people don’t need it to begin with. That’s what makes it so interesting. For all the other high-earning tech yuppies out there, you can be putting 55k/yr+ into your 401k (19500 payroll side, rest company contributions or “mega backdoor roth” conversion). You can put 6k into an IRA and re-characterize to Roth. Wouldn’t it be nice to take control of that money and invest it how you actually want? I love index funds and ETFs but at some point it makes sense to add in alternatives. That’s why RocketDollar is such a cool company, and that’s why I also think Republic is awesome. I appreciate having the opportunity to invest in a company that offers such an immense value-add in a market that’s otherwise saturated with the same exact offerings over and over again.

*Republic is providing 50 ‘Notes’ to me as compensation for publishing this blog. (Notes aren’t really worth anything and have no cash equivalent…. but who doesn’t like collecting loyalty points? Am I right or am I right?)

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