Stock Market

3 Alternative Investments To Consider Outside The Stock Market


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Investment theme stockmarket and finance business analysis stockmarket with digital tablet

We are in an aging bull market for stocks and many people are worried that the great run we have enjoyed over the past decade is coming to an end. Especially, because it has been ten years since we have seen a month as volatile as October. Volatility normally swells before a major market turn, not in the middle of bull market. Armed with that knowledge, many people are now asking me for alternative investments. People want to know how to prepare themselves for more volatility – both up and down and want to know where they can get uncorrelated returns when (not if) the next bear market hits. Here are three alternative investments that are worth doing more research on.

Private Equity:

Private equity refers to buying and selling private businesses, not public companies. This is a very wide lane and private equity deals come in all different shapes and sizes. The best deals I have found tend to be relative to a person’s overall portfolio. Meaning, someone with a small portfolio will look for smaller deals, while someone with a larger portfolio may want to look at larger deals. The idea here is that you can find a manager who can buy private businesses, fix them up and either sell them or take them public in a few years.  Many smaller companies are either sole-proprietors or partnerships, and some may need more funds to expand operations or improvements to their business. These small companies and shops’ performance will likely be more heavily dictated by proprietor experience and local economics which offers investors a good alternative to stocks and bonds.

Real Estate:

Real estate is another popular option for investors to put there money outside the stock market. Unlike stocks, real estate is tangible and everyone can relate to real estate, since we all live and work in some form of real estate. Ray Sturm, CEO of AlphaFlow, an automated alternative investment platform for real estate, told me via email that the most important thing an investor can do is look at their portfolio holistically, particularly with a view to the long term rather than getting caught up in day to day market madness. According to Sturm, this means not making any rash decisions based off any short term gyrations on Wall Street. Sturm believes that taking a long-term view and maintaining a properly diversified portfolio is paramount to success.

Marine Finance:

Marine Finance is an interesting alternative investment that allows people to invest in different aspects of the shipping industry. People can finance new ships, help companies buy new ships to expand their fleets, and invest in deconstructions. Marine finance is usually most impacted by global trade (e.g. emerging market improvements/declines) and vessel supply. Platforms like YieldStreet provide access to a variety of Marine Financing deals.

Bottom Line:

Stock can continue to rally from here but history shows us that it is just a matter of time until we slip into another bear market. Many studies also show that alternative investments are a good way to diversify your portfolio in both bull and bear markets. As with all investments, investors should do their own research to understand the potential risks and drivers of return, and make sure they have a sound understanding of how any alternative investments fit into their own portfolio.

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Investment theme stockmarket and finance business analysis stockmarket with digital tablet

We are in an aging bull market for stocks and many people are worried that the great run we have enjoyed over the past decade is coming to an end. Especially, because it has been ten years since we have seen a month as volatile as October. Volatility normally swells before a major market turn, not in the middle of bull market. Armed with that knowledge, many people are now asking me for alternative investments. People want to know how to prepare themselves for more volatility – both up and down and want to know where they can get uncorrelated returns when (not if) the next bear market hits. Here are three alternative investments that are worth doing more research on.

Private Equity:

Private equity refers to buying and selling private businesses, not public companies. This is a very wide lane and private equity deals come in all different shapes and sizes. The best deals I have found tend to be relative to a person’s overall portfolio. Meaning, someone with a small portfolio will look for smaller deals, while someone with a larger portfolio may want to look at larger deals. The idea here is that you can find a manager who can buy private businesses, fix them up and either sell them or take them public in a few years.  Many smaller companies are either sole-proprietors or partnerships, and some may need more funds to expand operations or improvements to their business. These small companies and shops’ performance will likely be more heavily dictated by proprietor experience and local economics which offers investors a good alternative to stocks and bonds.

Real Estate:

Real estate is another popular option for investors to put there money outside the stock market. Unlike stocks, real estate is tangible and everyone can relate to real estate, since we all live and work in some form of real estate. Ray Sturm, CEO of AlphaFlow, an automated alternative investment platform for real estate, told me via email that the most important thing an investor can do is look at their portfolio holistically, particularly with a view to the long term rather than getting caught up in day to day market madness. According to Sturm, this means not making any rash decisions based off any short term gyrations on Wall Street. Sturm believes that taking a long-term view and maintaining a properly diversified portfolio is paramount to success.

Marine Finance:

Marine Finance is an interesting alternative investment that allows people to invest in different aspects of the shipping industry. People can finance new ships, help companies buy new ships to expand their fleets, and invest in deconstructions. Marine finance is usually most impacted by global trade (e.g. emerging market improvements/declines) and vessel supply. Platforms like YieldStreet provide access to a variety of Marine Financing deals.

Bottom Line:

Stock can continue to rally from here but history shows us that it is just a matter of time until we slip into another bear market. Many studies also show that alternative investments are a good way to diversify your portfolio in both bull and bear markets. As with all investments, investors should do their own research to understand the potential risks and drivers of return, and make sure they have a sound understanding of how any alternative investments fit into their own portfolio.

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