The secrets of endowment-style investing revealed
Updated: Jun 25, 2021
RL069 - Retirement Lifestyle: The secrets of endowment-style investing revealed
Today on the Retirement Lifestyle Show, Roshan Loungani, Erik Olson, and Adrian Nicholson talk about the return potential and diversifying power of alternative investing. They explain the role alternative investing can play in a portfolio, the illiquid nature of these types of investments, and the risks versus rewards of endowment-style investing.
[07:41] What are Alternative Investments?
[15:17] Dissecting Non-Fungible Tokens
[18:08] Real Estate as an Alternative Asset Class
[25:20] Alternative Investment Options During a Pandemic
[30:50] The Illiquid Nature of Alternative Investments
[40:50] Assessing the Value of Alternative Investment Options
[42:35] Market Environments and Opportunities in Endowment-Style Investing
[45:20] Cryptocurrencies as Alternative Asset Classes
[52:20] Why you need to Manage Your Expectations in Alternative Investing
[59:53] Where to Find Alternative Investment Opportunities.
For the full show notes keep scrolling down!
Roshan Loungani can be reached at firstname.lastname@example.org or at 202-536-4468.
Erik Olson can be reached at email@example.com or 815-940-4652.
Adrian Nicholson can be reached at firstname.lastname@example.org or at 703-915-8905.
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Full Show Notes:
What are Alternative Investments?
Alternative investments are financial assets that do not form part of the conventional investment categories such as bonds, stocks, or cash. They include private equity, hedge funds, art and antiques, commodities, and managed funds. Some investors also consider real estate as an alternative investment option. For the most part, alternative investment assets are managed by accredited, high-net-worth individuals due to their lack of regulation, complex nature, and degree of risk. These investment options also have a low correlation of returns compared to those of conventional investments. This means that the market performance of traditional investments rarely affects the outcome or gains of alternative investments. Furthermore, alternative assets are often illiquid; thus, investors find it considerably more difficult to cash out whenever they want.
Alternative Investment Options During a Pandemic
As investors navigate the world of investing during a pandemic, alternative investment options are slowly gaining attention as a way of strengthening and diversifying portfolios. When most businesses paused their operations after lockdowns were implemented, the markets went down, prompting a fall in prices. If you were to invest in real estate when the markets are down, there is a greater chance of profitability in the future. Experts agree that sometimes the best way to approach alternative investing is to do nothing. As an investor, your primary goal during uncertain times should be to buy and hold the asset regardless of how the market performs. So, find asset classes that suit your profile, add them to your portfolio and wait.
The Illiquid Nature of Alternative Investments
Although alternative investing presents opportunities for investors to enhance their portfolios, most investors are often skittish about illiquid alternatives. One of the primary reasons that makes them illiquid is because alternative investments are rarely publicly traded or priced. Although investors are worried about tying up their money in assets that they can't sell or exchange easily, illiquidity can work to an investors' advantage. For example, some alternatives hold on to investors' investment for as long as a decade which may help smooth out the ups and downs of portfolio swings.
Another interesting argument for the benefits of illiquidity is lower volatility. Since investors can't buy or sell illiquid alternatives easily, they're less prone to chaotic market sell-offs. Although alternative investments could be experiencing similar ups and downs as traditional investments, these options typically focus only on the exit price and not the consistent fluctuations.
All opinions expressed by podcast hosts and guests are solely their own. While based on information that they believe is reliable, neither Arete Wealth nor its affiliates warrant its completeness or accuracy, nor do their opinions reflect the opinion of Arete Wealth. This podcast is for general informational purposes only, and should not be regarded as specific advice or recommendations for any individual. Before making any decisions, consult a professional.