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The right way to Construct Wealth within the Neighborhood

Most of us know the benefits of consuming locally grown foods – they are fresh, full of nutrients, and contribute to our overall health and wellbeing. So how about boosting our financial wellbeing while boosting our local economy? Community ownership is a rewarding way to build financial health.

Community investments can generate returns for investors, while those dollars are used locally to support growing businesses on Main Street while creating employment opportunities. Investing outside of Wall Street allows us to direct our investment funds towards challenges that need to be resolved closer to home. There is no doubt that our communities would look very different if even a small fraction of our investments were made in our own neighborhood. Let's see how this becomes possible:

Public market versus private market investment

When we hear the term "public markets" it means investments that are available to the general population, such as stocks and bonds that are traded on traditional stock exchanges. In the private markets, fast-growing companies that are not yet listed are selling professional investors (such as institutions and high net worth individuals) in exchange for the capital they provide. Until the JOBS Act was passed in 2015, the majority of Americans were banned from taking this second type of opportunity – investing in companies before they are public – which is unfortunate given that historically, most of the investment returns are in these private markets be achieved . In just one example, Uber's valuation rose 2,059,900% from its initial private “seed capital” to its IPO, but today it's up 36% from its IPO. This means that the entire financial return was in the hands of private investors instead of being used by everyday private investors. To put it even more simply, an investment of $ 10,000 in Uber's first round of investments in 2010 would have resulted in over $ 200,000,000, while an investment of $ 10,000, once the stock was open to the public, would have been worth $ 6,435 today. It stings a bit, doesn't it?

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How to Build Wealth in the Community

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Of course, not all private companies will have a trajectory like Uber, but generally wealth is built in the private markets.

The collaborative use of private capital can not only increase financial returns, but also contribute to a more equitable and sustainable world. This model not only supports small businesses, but can also finance renewable energy and affordable housing projects. In Germany, for example, over 50% of the capacity for renewable energies is in municipal ownership. According to The Guardian, more than a million households and small investors there have become energy producers. They believe that peer-to-peer lending, which individuals can use to lend or raise funds directly for projects, could increase community ownership of renewable energy around the world.

Shifting capital to Main Street means shifting power. When we are involved in our communities, we are more engaged, exercising our votes, and can often reduce the influence of the larger brokers. We all need to understand the power of our wallets and how by directing our capital towards private market investment we can help fill the finance gap for entrepreneurs, provide affordable energy, and fund critical solutions like affordable housing. We need more inclusive capital markets that anyone can participate in to fill the gaps left by traditional finance.

How to invest

Community investing can be more time consuming than traditional investing, but it doesn't always have to be. More and more online financial platforms like Worthy Financial are offering painless access to alternative, community-focused investments. These platforms provide access across all asset classes, from growing companies' equity to local real estate to supporting farmers or solar energy providers. You can even invest in creative assets like classic cars, artwork, and wine to get away from Wall Street while building your wealth.

The barriers that have prevented the average investor from accessing the same benefits that larger institutional or high net worth investors have had are also dissolving. Regulators recently opened a new avenue that enables retail investors to make private investments in their professionally managed 401 (k) accounts. While direct investments are not yet possible, this is a good first step – and investors can currently make their own alternative investments through a self-directed IRA.

The other benefit of private market investment is the protection and diversification of the portfolio. With the stock shock caused by the coronavirus, it has never been more important to hold assets that are not tied to public markets. Diversification goes way beyond owning ETFs – investors need assets that don't correlate with stocks. Markets are difficult to predict and often emotionally driven – the travel and retail sectors are down 20% when we thought the pandemic was slowly fading a month ago. This is a loss that nobody would like to see with their nest egg.

Renewed economic growth

Community investment can be very rewarding while working to rebuild a globalized economy. By bringing our dollars back to Main Street, not only do we create wealth for ourselves from the return on our investments, but we create wealth for others by improving their economic opportunities. Citizens should share more of the value we create in the economy. In this way, we are creating a more robust and sustainable economic future for everyone.

Sally Outlaw (2 posts)

Sally Outlaw founded Worthy Financial to provide high-yield alternative investments to the public. Your personal and business mission is a business opportunity for everyone. Worthy took advantage of newly updated securities regulations to empower everyone to save painlessly and make 5% of their money at the same time – all while helping businesses in the community grow. For more information on Worthy's drive for a more inclusive economy, please visit social media.

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