It is no secret that the digital age has created a greater number of alternative investment opportunities, perhaps most notably cryptocurrency.
However, other alternative investments have long existed, yet traditional options such as stocks, bonds, and cash have typically been the popular choices.
Now, Nasdaq now reports that alternative investments are starting to eclipse the traditional options.
There are a multitude of current reasons transpiring that help explains this. One of the obvious ones is the current inflation rates that the country is dealing with. As prices rise on goods across the board, suddenly, you no longer get as much for your money. The dollar has weakened over the last year, making investors skeptical about relying on cash investments right now.
Whereas alternative investments, such as hedge funds, are known for being able to weather against inflation pretty well. But perhaps more important is that alternatives also see bigger returns. Traditional investments are at the point right now where if they see a gain, it might not be as big as it once was.
The notion is that investors need to be patient and wait for the tide to change. But the high money nature of alternative investments means when they see gains, those increases are still sizable.
That being said, Nasdaq reports that while alternative investments might be gaining traction, a lot of that is among billionaires rather than people with more common incomes.
The simple reason for explaining this is that you need to be an accredited investor to access such options as hedge funds. And to be an accredited investor, you need a yearly salary of over $200,000 or a net worth of over $1 million. That criteria naturally excludes most people, meaning alternative investments are not even a consideration for much of the general public.
Fred Hubler, CEO and Chief Wealth Strategist for Creative Capital Wealth Management Group, who built his company on researching and analyzing accredited investments for his clients, believes clients should have a small (no more than 25%) allocation to accredited investments focused on reducing the overall risk of portfolios while usually increasing income and or growth.
Hubler and his team at Creative Capital spend a lot of time educating clients as to the legitimacy of these investments. “We are cognizant that not all of our clients are accredited,” said Hubler, so we have collated investments with non-stock market exposure that are not just for accredited investors. For example, private preferred stocks from a publicly traded company can give clients income with little stock market exposure, but there is a 3-5 year illiquidity.”
Still, staying aware of how much money is tied up in this shifting trend is noteworthy. Nasdaq states that by 2025, around $17.2 trillion is expected to be tied up in alternative investments. They say that that number is a four-fold increase over what it was in 2010.
To learn more about the trajectory of alternative investments and what it could mean for you, check out the article from Nasdaq.
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