Stocks and bonds are not enough to help me execute my investing plan. With them alone, there is no way I can reach my investment goals. I need alternatives.
In my mind, stocks, bonds are not enough to help me effectively execute my investing plan. With them alone, there is no way I can reach my most important investment goals and financial priorities. Over the last eight years, the S&P 500's returns were only mediocre; about 6.5 percent per year. Given 2016's disappointing stock market performance, I have been looking at various alternatives investments to bolster my investment portfolio.
From the research I've done, it appears that alternative investors are largely based in North America, which is where I am living. According to Strategy & PwC's consulting team, North American investment is expected to grow to nearly one-third of the market - reaching more than $6 trillion of the $18.1 trillion, by 2020! This is a positive sign that the demand for alternative investments is growing strong, particularly in my neck of the woods.
Nowadays, the investors who are investing in alternative investments are focused on emerging markets, infrastructure and real estate, private debt, private equity and other alternative sources of returns, such as tangible assets.
In times of economic instability, like Brexit and post-U.S. election 2016, many people put their trust in tangible assets; like shipping container investments for example. This is because these type of alternative investments are low risk. They exist outside of traditional investments, and thus are not really affected by economic factors in the same way as bonds and stock shares are.
The biggest challenge for me in 2017 will be to find higher returns without taking on significantly more investment risk. Because I am focused on more protection and draw-down risks, the scope and attractiveness of alternative investments is increasing. After all, they have already proven they can provide a stable, inflation-protected income stream, and also help to reduce overall volatility of my investment portfolio.