Investors have been creating wealth in publicly available stock markets for over 200 years. Initially, only the wealthy could access the risk and potential growth that the stock market offered. Today, the stock market is accessible by anyone with more than $10 to invest.
By contrast, owners of private companies have been creating wealth for almost 1,500 years!
Investing in private companies is a category within the broader term “alternative investments”. For one reason or another, newer, publicly traded investments have become known as “traditional” investing.
The world’s largest manager of traditional investments, BlackRock, states that “alternatives are investments in assets other than stocks, bonds and cash, or investments using strategies that go beyond traditional methods, such as long/short or arbitrage strategies.”
Alternative investments can add benefits for investors, beyond traditional investments, such as lowering volatility, enhancing returns, and broadening diversification. For example, hedge funds can provide returns not correlated to the broader stock market. So when the stock market is done, hedge funds can see positive performance. Here are some other examples of alternative investments:
– Hedge funds
– Private equity
– Commodities
– Real assets
– Direct investments in start-ups and private companies
– Venture capital
– Fund of funds
– Private placement debt
Don’t just take my word for it → Check out BlackRock’s perspective here.
Many question the ability to publicly traded investments to continue to generate substantial returns. As we continue along the path of this economic expansion since 2009, alternatives may be necessary to meet investor’s needs and goals. Stock market volatility has returned to public markets due to trade wars, the United States’ broader foreign policy, the Federal Reserve intervention in global markets, and souring investor sentiment because of the first 3 points. Alternative sources of return will be important for people to achieve their broader goals.
Investors will find more confidence in their long term ability to create wealth by utilizing alternative investments.
I would encourage every investor to consider alternative investments today. My investment advisory firm, Zenith Solutions, is here to help educate and empower investors to implement the right alternatives in their investment portfolios. We are building a platform of unique, non-traditional alternative investments to add value to investors today.
-Jason
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