What’s up, everyone? Today, we’re answering the question, “Which type of investment is right for you?”
Where do alternative investments fit into the investment landscape?
This is a government bond, which is the safest investment because it is backed by the federal reserve.
The APY is a historical low at 1%.
The next-safest investment is an asset-backed security or a mortgage-backed security. APY is 1-3%.
This is a bond provided by a company; the more stable/successful the company, the lower the rate (1-10%).
All of these investments mentioned previously provide no equity in the company.
Investing in stock gives you equity in the company. So, stocks are naturally riskier.
The S&P 500 rate of return is about 10%, and this is the benchmark number for fund managers and their investors.
If you, as a fund manager, pitch your fund to an investor, they will compare your performance with the S&P 500. If you can’t promise your investors a rate higher than 10%, then they won’t invest with you.
Any investment advisor will recommend 55% to stocks, 30% in bonds, and 15% to alternatives.
Alternatives refer to private funds, including Private Equity, Real Estate, Venture Capital, Hedge Funds, Forex, etc.
Many people think that there’s only 2 options: low risk, low reward or high risk, high reward.
However, when fund managers can find their niche, they can offer a low risk, high reward investment!
That’s why alternative investments are on the rise and will continue to be!
Consistency & Conclusion
Although the S&P 500 offers an average return of 10%, it is volatile.
If your fund offers a consistent 9% return, then this could attract investors even though it’s below the benchmark.
So, hopefully after looking at all this information you can decide which type of investment is right for you!
That’s it for today!
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DISCLAIMER: This content is for educational and informational purposes only. It is not to be taken as tax, financial, or legal advice. You should always consult a legal professional before taking action. Furthermore, this is not a recommendation to buy or sell any security. The content is solely just the opinion of the authors.