How To Avoid Market Swings
How are you doing in your search for the ultimate investment – low risk, high guaranteed return?
Well, I have good news and bad news. Let’s start with the bad. After 25 years in the investment industry, I have not found it. We know economic rewards require some level of risk. Typically, the greater the risk, the greater the potential return must be to attract investors, that’s just Economics 101. However, the good news is there are opportunities where the reward/risk equation can be much more attractive than most. It takes diligence and a skillful team but it’s possible. The greater our financial net worth, the more the opportunities. This is because its easier to meet minimum investment amounts or investment periods.
Ultra high net worth families and institutional investors have been enjoying these opportunities for years. One such sector is called non-traditional investments. We are familiar with traditional investments that buy and hold stocks or bonds for a period of time. Non-traditional investments pursue alternative strategies that seek to generate returns that are less correlated with market swings. In other words, the returns are not fluctuating with the markets. The ultimate would be no correlation to the traditional stock & bond markets. As with most investment sectors, there are many types of non-traditional investments; the risk level, complexity and potential returns vary significantly. To benefit from these opportunities, you need a proven guide. An experienced team that is diligent and skilled enough to find the unique opportunities where the reward noticeably exceeds the risk.
Let’s look at some examples:
Real Estate. There are many ways to participate in real estate. Repurposing could involve adding services and rezoning raw land, or it could entail refurbishing & upgrading under-utilized, high density residential and commercial properties. Having ownership in the development and construction of residential or commercial buildings is another way to participate.
You can also participate in real estate through mortgages. Residential mortgages fluctuate with interest rates and can have low rates of return with low interest rates. Construction mortgages, however, can provide a much higher return. This is an area banks have generated significant profits from for years. Rate fluctuations are very modest compared to residential mortgages, are much higher and have little correlation with stock markets.
Factoring. This is a financial transaction in which a business sells its accounts receivable to a third party at a discount. This is an opportunity that can provide solid returns in both strong and weak economies.
Infrastructure. Public-private partnerships (PPP or P3) are an arrangement between two or more public and private entities. Governments have used such a mix of public & private endeavors throughout history. However, there has been a clear increase in governments across the globe using these arrangements to finance the building of schools, hospitals, transportation systems, water, and sewage systems. Typically, investors receive a steady income stream from these investments regardless of the economic environment.
From experience, we know some of these opportunities will be new to you, but that should not be true. You have worked hard to accumulate more than most and your position should enable you to access exclusive opportunities and bypass swings in the markets. Our clients have enjoyed the above opportunities for years. The historic performance has little or no correlation with the stock or bond markets. You deserve to know more about what you are missing.