Younger, wealthy investors are looking beyond the stock market for higher returns… landing them with alternative investments.
According to a Bank of America Private Bank study, 75% of high-net-worth investors between the ages of 21 and 42, compared to 32% of investors over 43-years-old, don’t expect “above average returns” solely from traditional stocks and bonds. In gathering the data, the firm polled 1,052 high-net-worth investors with at least $3 million in investable assets.
What’s more is 80% of those younger investors are turning to alternative investments. Bank of America found that the 21-42 age group are allocating three times more to alternative assets and half as much to stocks than other generations.
By definition, alternative investments are assets that don’t fall into one of the conventional investment categories: stocks, bonds and cash. Alternative investments can include private equity or venture capital, hedge funds, managed futures, art and antiques, commodities and derivatives contracts. Real estate is also often classified as an alternative investment.
Some investors seek out alternative investments because they have a low correlation with the stock and bond markets, meaning they could maintain their values in a market downturn. Also, hard assets such as gold, oil and real estate can be effective hedges against inflation. And if an investor is seeking more diversification in their portfolio, alternative investments can be useful.
With more interest in alternative investments, it’s important for investors to understand the risks — as well as the products themselves — before shifting portfolio allocations.
Marc Bautis’ podcast The Agent of Wealth has covered a variety of alternative investments, such as investing in precious metals, real estate, fine wine and more. You can find these episodes at agentofwealth.com.
If you’re considering adding alternative investments to your portfolio, it’s important to speak with a financial professional before you take action so you can better understand how the risks and rewards align with your personal goals. Our team of financial advisors are ready and willing to speak with you.
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