Those who have amassed their wealth by sticking with run-of-the-mill stock and bond offerings may wish for the excitement of innovative new investments. And when volatility seems to be at an all-time high, with news reports often prompting mega equities swings without any change in the market's underlying fundamentals, diving into a smaller pool of more seasoned investors can seem like a wise choice when wealth preservation is your goal.
Some alternative forms of investment can provide high net worth investors with interesting returns while also presenting a chance for rapid growth. With these types of alternative investments, you can generate wealth that will help you preserve your capital's future while receiving an income.
Read on for five reasons high net worth investors may wish to expand beyond the realm of stocks and bonds into alternative investments.
1. You Can Achieve Capital Preservation Without Uncompensated Risk
Unlike penny stocks and other forms of market gambling, alternative investments can preserve assets and set up steady streams of income without uncompensated risk.
Because of their natural alternative state, these investments usually weed out the less serious investors and focus on asset preservation and growth for high-net-worth investors.
2. You'll Benefit from a Fast-Growing Financial Market
By the time word of a hot new stock or investment opportunity hits the streets, the chance to get in on the ground floor has usually long passed. While tales of purchasing a chunk of Amazon stock at $5 or mining one's own Bitcoin back in the early days can be inspiring, the odds of an individual investor hitting on the next big thing is fairly low.
But when it comes to alternative investments that are specifically geared toward high net worth investors, you have the advantage of getting into a quickly-expanding market before its growth is diluted.
3. You Can Mitigate Your Risk of Loss
Some alternative investments, like diversified income funds, have a base target preferred return plus profit-sharing of any amount over this return, targeting capital preservation.
In today's economic climate, where even government-backed pensions may be subject to change or cancellation, having a private source of regular income can be a tremendous asset to you and your loved ones.
4. You'll Have Access to Unique Private Investments
No public stock or bond can provide you with the thrill of being able to invest in private opportunities. Some alternative investments are particularly focused on investing in unique private companies that can’t wait after traditional financial institutions to facilitate their growth.
These unique private investments could also give investors the ability to make an impact on a business whose needs might otherwise go unfulfilled.
5. You Can Shoot for High Rates of Return
You'll find that few investments provide any promise of high returns without a corresponding risk of short-term value fluctuations—that is, if you want an investment that will beat inflation, most investors assume it's a given that you'll need to accept some risk of loss.
Alternative investments can be a different story, and high net worth investors who take advantage of alternative strategies may achieve rates of return that traditional investors only dream of, while reducing their risk at the same time.