Getting Exposure To Alternative Assets (Listed Private Equity, Gold/Silver and Infrastructure/REITS)
Stocks, bonds, and cash equivalents (traditional assets) are familiar to almost everyone, and many individuals invest in them in the hopes of capital appreciation, dividends, and interest returns. Alternative assets, on the other hand, are investments that are not part of the traditional asset classes. Listed private equity, gold and silver, and infrastructure/REITs are examples of them.
They provide for portfolio diversification and a reduction in overall risk exposure across all investments yet alternative assets have been disregarded by Australia’s high net worth investors, who prefer traditional shares and bonds.
Benefits of Alternative Assets
1. Unrelated to the stock market
Investors pursue alternative investments for a variety of reasons, one of which is diversification. An investment that is uncorrelated to the stock market is one that does not fluctuate in response to the market’s ups and downs. Diversification and excellent returns were two of the top reasons for top U.S. investment advisors to invest in alternatives, according to a recent poll by iCapital Network
2. Lack of volatility
The share price of a traditional public investment fluctuates based on a variety of factors, but it is rarely linked to an actual asset. You escape the volatility of public investments because private investment shares are not publicly traded. Furthermore, your investment is usually backed by a genuine asset.
3. Passive Investment
The majority of traditional investments take a significant amount of time to handle. Because you’re not committing as much time, your other investments may fail, or you may fall for deceptive scams that cause you to lose money. Alternative assets, on the other hand, are often passive and do not necessitate as much time and attention to profit.
Alternative Assets Explained
? Private equity
Investing in private equity comprises purchasing stock in companies that are not publicly traded or purchasing stock in publicly traded companies with the intention of turning them private. Private equity can include a variety of ways of providing capital to businesses at various stages of growth. Exiting investments is how private equity firms generate money. They try to resell the businesses for much more than they spent for them. Profits are subsequently distributed according to a distribution waterfall.
Gold and silver provide a hedge against financial market volatility. Due to the historical value linked to these items, as well as the fact that they are drivers of inflation and deflation, they have specific advantages. Most other commodities lose value during a deflationary period, but gold and silver have never followed the same patterns. Investing in gold can help you stay up with inflation, which has been a feature of the global economic system.
REITs that own and manage infrastructure-related real estate are known as infrastructure REITs. These types of properties are critical to the economy because they facilitate the transportation and storage of data and energy. Telecommunications assets such as cell towers, fibre optic cable, and small cells are among the most popular infrastructure assets controlled by REITs. Oil and gas pipelines and processing facilities are examples of midstream energy assets that REITs can own.
Investing in alternative assets
It’s critical to consider a financial advisor and compare offers when investing in alternative assets. People often debate whether or not it is useful to engage a financial counsellor, but it is better to hire an advisor when it comes to fulfilling financial goals and saving time. Just like any investment, there will always be many options. It’s best to compare offers and see what works best for you.
Although you may not be completely ignorant of the market, a financial advisor is likely to be more knowledgeable than you are, as they are familiar with complex products and can decipher the nuances of numerous instruments. They may also assist you in comparing options because they have established relationships with intermediaries who can create custom schemes for you.
An alternative investment is a good option for anyone looking to diversify their portfolio further. Various alternative investing strategies will appeal to you depending on your stage of life and the amount of interest in actively managing your finances.