Alternative Investment Solutions:
When we think of investing, most of us think of stocks and bonds, and without doubt mutual funds. But, did you know there are a number of alternative investing possibilities that can help you in diversifying your portfolio and possibly increase your returns? Let’s break it down in very simple terms.
Investments are financial assets outside the bounds of the more traditional types of assets we know: stocks and bonds and cash. In other words, they are the alternatives.
• Real Estate - property, or the real estate funds.
• Private Equity - Investing in private companies prior to their initial public offerings.
• Hedge Funds - Funds where they may utilize diversified strategies to maximize returns in both upwardly moving markets and down moving markets.
• Commodities - Gold, silver, oil, and different physical assets.
• Cryptocurrency - Digital currencies, such as, but not limited to, Bitcoin, and Ethereum.
All of these alternatives generally give rise to unique opportunities for growth, and many of them have an inversely proportional correlation with more traditional investments, thus providing a balance for portfolio risk.
Why look toward alternative investments?
• Reduce Risk - Don’t rely only on stocks and bonds; spreading your money around makes your investments safer.
• Chance for Higher Returns - Some alternative investments can grow faster than regular ones.
• Protect Against Inflation - Things like property or commodities usually keep their value even when prices go up.
• Access Special Opportunities - You can invest in things like startups or private companies that aren’t available in normal markets.
Why Don’t We Take Action?
Although we know how beneficial alternative investments can be, our mind is hesistant to make the leap. Psychologically, this occurs for a few reasons:
• Fear of the Unknown: Our brains are wired to crave certainty. Traditional investments seem “safe” because we are familiar with them, even though alternatives may provide greater appreciation.
• Comfort Zone Bias: We tend to stick to things we know, thinking “what I have is enough”, rather than realizing that other opportunities could help our financial future.
• Short-Term Thinking: The lure of comfort now outweighs long term gain. Alternative investing requires patience and research which many would rather unknowingly avoid.
Solutions to the Mind Block:
• Education: Education itself can banish fear. When the risks and payoffs of new options are understood, the risks seem less intimidating.
• Start Small: Taking small, calculated steps can help to gradually widen the comfort zone.
• Change Perspective: Think of alternative investments as opportunities for growth, not just risks.
Alternative investing is not only about putting your money to work - it is a frame of mind. Step out of the comfort zone, got beyond fear, and accept calculated risks to open doors that traditional investments may never provide.
