Most investment advice tends to be one-size-fits-all. Discussions of finding index funds with low fees and the "right" amount to save for the future can be useful for beginner investors, but don't begin to scratch the surface of your needs when the value of the investments you manage is in the multi-comma range.
This blog series focuses on some of the unique and varied ways high net worth investors (HNWIs) can preserve their wealth. Alternative investments are a key building block of any preservation plan. Read on to learn more about the importance of alternative financial products when implementing a long-term wealth preservation strategy for your assets' future.
Why Are Alternative Investments So Appealing to High Net Worth Investors?
Because of today's global uncertainties in traditional financial markets, including the increased day-to-day fluctuation that can come from the expanding use of automatic trading programs, high net worth investors can sometimes find stocks, bonds, and index funds to be too shaky for their long-term purposes. Insecure currencies and threats of a trade war place further pressure on many sectors of the economy.
Portfolio diversification by means of alternative real estate funds and hedge funds can allow you access to exclusive investments that aren't available to all investors. This can mean a higher-than-average return on your already substantial assets while shielding you from many of the outward forces pressing on traditional markets. Hedge funds, in particular, are able to utilize strategies that offer stable and constant returns in contrast to the fairly static risk/reward ratio seen in broad market funds.
Geographic diversification allows high net worth investors from around the globe to own unique assets that are largely insulated from currency fluctuations, civil wars, and other geopolitical controversies.
What Types of Alternative Investments Provide Wealth Preservation Opportunities?
There are several broad categories of alternative investments that can give high net worth investors' portfolios a boost.
Hedging your investment risk
Starting in 2007, the world financial crisis leading to the collapse of the banking financial sector gave hedge funds a long-term boost. While many investors cashed out their accounts in a panic as the drop intensified, hedge fund investors were able to maintain good returns by betting against subprime mortgages and other shaky financial instruments. Today, hedge funds continue to provide a literal hedge against sudden market drops.
Holding on to tangible values
Real assets have always been attracting investors looking for real and tangible values. Because of this, a geographical diversification of your real estate funds can be a valuable addition to any high net worth portfolio, giving you a stable source of growth that can carry you through tough economic times.
Maintaining your income stream
Another valuable source of steady income can be a diversified income fund. This type of fund pulls from a wide range of income sources, ensuring that you're never too concentrated in one geographical area, industry, or asset class. It illustrates the old adage about not putting all one's eggs into one basket: by diversifying your investment's income streams, you'll be able to maintain consistently returns even when one particular sector is facing economic troubles.
Diversifying your portfolio into some of these alternative investments can also leave you well-positioned to take advantage of any opportunities that present themselves while your assets remain safe from inflation and underperformance.