IT’S NOT ONLY MUSIC LOVERS who venture beyond the mainstream to tune in to alternative offerings. Main Street investors in search of diversifiers, shock absorbers and risk reducers for their portfolios should also consider owning a small sliver of alternative investments, or ones that differ from plain-vanilla asset classes such as stocks, bonds and cash.
Access to “alt” investments, such as hedge funds, private equity, venture capital and the like, is still restricted mainly to “accredited” investors, or wealthy investors who meet Securities and Exchange Commission requirements, such as having a net worth of more than $1 million (not including a primary residence) or annual income of more than $200,000 (or $300,000 including a spouse). Alternative offerings available to accredited investors face less regulatory scrutiny (which means they have fewer investor protections). They also tend to include private companies and asset classes that don’t trade on public exchanges and employ more sophisticated strategies. For instance, private equity refers to investments in companies that aren’t publicly traded. Hedge funds can use borrowed money to amplify returns, and they can sell stocks short, betting on a price decline, which gives them the ability to make money in down markets. Alternative investments are less liquid, which means they’re harder to buy and sell quickly. And they typically require a longer holding period to realize profits.
But you don’t have to be an accredited investor to invest like one. Mom-and-pop investors can gain exposure to investments that mimic the strategies and performance of alt investments via exchange-traded funds and mutual funds. “The industry is becoming more democratized,” says Tom Kehoe, managing director and global head of research and communications at the Alternative Investment Management Association.
Continue reading your story on the app
Continue reading your story in the magazine
Find ATTRACTIVE YIELDS in Today's Market
Our field guide to income investments identifies opportunities that range from ordinary to downright exotic.
Profit From Healthy Profit Margins
These companies find ways to flourish even in tough times
Fight Back Against High Inflation
Whether you’re 28 or 68, you’re staring down a surge in con-sumer prices. But for many millennials, the precipitous rise in inflation—which reached an overall rate of 8.5% in March—has been especially steep.
Create a Financial Plan for a NATURAL DISASTER
You’ll recover more quickly if your important documents are secure.
Caregivers Share Their Stories
My column on caregiving (see “Living in Retirement,” Feb.) generated a number of responses from readers who offered their own perspectives. “People not in this situation don’t have a clue, and that includes ‘experts,’ ” writes Ken Jarosch, sole caregiver for his wife, Kathy, who suffers from muscular dystrophy. “I went to several caregiving classes, where we were served a nice dinner and a sunshine talk. But the real help came from the people in attendance, who actually live this.”
Buy Bonds Now? That Depends
I insist it is folly to quit sound invest-ments because of a bad quarter, but the bond market swoon of early 2022 tests my resolve. When superb stuff such as tax-exempt toll-road bonds, taxable infrastructure municipals and BBB corporates suffer losses of 6% to 10%, that is true shock and awe. The last time returns took a big wallop was the summer “taper tantrum” of 2013, when, despite the absence of inflation, traders overreacted to Federal Reserve plans to cut back bond purchases. That episode is remembered now as an epic buying opportunity— thus, it is tempting to interpret the current downturn in the same vein.
ABLE Accounts Offer Financial Independence
People with disabilities, and their families, can save for a variety of expenses in these tax-advantaged accounts.
Answers to Your SOCIAL SECURITY QUESTIONS
Figuring out how to get the most out of your benefits is not as simple as it looks.
THE MONEY TALK NEW COUPLES NEED
Whether or not you merge your finances, you need to be on the same page. Natalie and Dan Slagle are founders of Fyooz Financial Planning, a financial planning firm that specializes in advising couples.
An Urgent Need for Cybersecurity
In June 2017, Russian hackers launched a malware attack on Ukraine called NotPetya. The attack, which locked users out of their own files unless they paid a ransom in bitcoin, was just one more tactic in the conflict between the two nations that had begun three years earlier. But viruses don’t respect borders, and this one spread far beyond Ukraine.