The three major equity indexes on Wall Street are experiencing their worst stretch of losses in decades, and this sharp downturn is being echoed globally.
It comes amid investors’ concerns over inflation, which is forcing central banks to slam the breaks on their economies. Other major economic factors include the ongoing war in Ukraine, COVID-19 lockdowns in China's manufacturing heartlands known as the “factory of the world,” and a number of household-name companies posting weak results.
This backdrop is creating a yield-starved environment for investors.
As such, for those looking for both capital appreciation and capital preservation, now is the time to consider diversifying into less traditional, return-enhancing asset classes.
These could include venture capital, structured products, cryptocurrencies, high-dividend stocks, hedge funds, managed futures, and direct real estate, among others.
Such investments could also be useful tools to improve the risk-return characteristics of your investment portfolio. This is because they increase diversification and reduce volatility, due to their low correlations to more traditional investments such as stocks and bonds. Plus, they can hedge some portfolio exposures.
However, considering that these investments are often more complex than their traditional counterparts, working alongside a good fund manager will likely be critical to ensuring return-boosting results.
While these less conventional asset classes should also be considered, investors should remain invested in the traditional markets, too, because financial history teaches us that stock markets go up over time.
Yield-starved investors should explore less traditional opportunities, not only for potentially higher returns, but also because they provide diversification and portfolio downside protection.
London-born Nigel Green is founder and CEO of deVere Group. Following in his father’s footstep, he entered the financial services industry as a young adult. After working in the sector for 15 years in London, he subsequently spent several years operating within the international space, before launching deVere in 2002 with a single office in Hong Kong. Today, deVere is one of the world’s largest independent financial advisory organizations, doing business in 100 countries and with more than $12bn under advisement. It specializes global financial solutions to international, local mass affluent, and high-net-worth clients. In early 2017, it was announced that deVere would launch its own private bank. In addition, deVere also confirmed it has received its own investment banking license.
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