New investment strategies don’t stray far from traditional products.
As I was catching up on my back issues of the Wall Street Journal I came across an article telling me that in this new economic environment investment advisers are embracing new tactics and turning their clients to alternative investments. (Advisers Ditch ‘Buy and Hold’ For New Tactics, WSJ 4/29) My first thought was “it’s about time.” As I read the article though I realized that when the investing establishment talks about alternative products they are mostly referring to new flavors of the same old menu of stocks and bonds.
The biggest disappointment here is that most money managers are simply becoming more active traders rather than just following the traditional buy and hold approach. In fairness, for the small percentage of investment advisers that truly know how to do this, it is probably a good thing for their clients. But what would really be much better for most investors is the recognition that there are other asset classes available to them, and that they offer significant portfolio enhancements in terms of diversification, returns, and security. Unfortunately it appears that the “new” investment tactics consist of exchange-traded funds, structured products such as derivatives, asset allocation funds and hedge funds, or taking a more quantitative approach to investment decisions. A very small number of advisers are looking for true alternative assets to expand their clients portfolios, but most shy away because their knowledge and experience doesn’t stray too far from the tried, and tired, world of stocks and bonds. True alternatives include various real estate investments, currencies, commodities such as gold, and even oil and gas exploration.
Real estate, if approached the right way, is still one of the safest and best investments available to most investors today. There are dozens of great real estate investment approaches that vary by risk-return, time horizon, and level of investor involvement and control.
Trust deed investments offer one of the highest levels of security, quickest return, and least management hassles in the market today. On the opposite end of the spectrum is pre-developed land investments (which we previously discussed in Identifying High Growth Areas.) In the middle are direct commercial or residential income investments, or buying REO properties which we discuss in the next article.
What the investing establishment doesn’t want you to know is that these investment opportunities are accessible to most investors, including through IRAs or 401ks providing tax free or tax deferred growth, and offer viable alternatives to the volatile and unpredictable stock market.