You have probably heard that diversification is the key to reducing risk while increasing your wealth. Holding different types of assets such as stocks, bonds, real estate, and even collectibles can ensure that your entire portfolio does not fuel when an asset has a bad day. By investing in alternative products, you can protect yourself from stock market volatility, especially in uncertain times – like the roller coaster ride that recently took place with the COVID-19 pandemic.
However, to diversify your portfolio you need to know what types of alternative investments are available. Fortunately, there is a whole class of investments that have recently come to the market due to changes in securities laws and that can generate a robust annual return on your portfolio. Many are available with minimal investment thresholds and no purchase or redemption fees. To get a full understanding, let's start from scratch and split the options.
Understand the story behind expanding investment opportunities
In the past over 80 years, 98% of Americans have not been allowed to buy any of the most profitable assets to build our wealth. These alternative investments – such as investments in private equity or private debt – were only available to wealthy individuals and institutions. It's no wonder that financial progress is difficult when our traditional choices are essentially bank CD accounts or the public stock market (where much of a company's growth took place before going public). Because of these regulatory restrictions, we had very little opportunity to build and protect our own nest egg.
In 2012 the JOBS Act changed this and opened the door to the “everyday” investor to get access to investments in growing private companies and even to participate in private loans to private individuals and municipal companies. People help people. These community-based investments give us the opportunity to support entrepreneurs who create jobs, drive innovation, and breathe life into our cities.
Understand investments in private markets
Why are these private market investments important? In the past, they have not only achieved higher financial returns, but also Social returns. Where you put your money is important. As an investor, you can choose investments that support your communities – that is, they support Main Street and the local economy instead of Wall Street.
These options include buying shares in local businesses, investing in property certificates that help homeowners keep their homes, and fixed interest rates tie up that support growing American companies. Being able to be a stakeholder in our communities and with each other is crucial and exactly what these new investments are supposed to offer. This form of "Community Capital" helps Creating a more inclusive and thriving economy for everyone.
Let us summarize
What is a bond? A bond is a loan from an investor to a borrower who is usually a company or government. Your bond investment typically pays fixed interest payments every month until either the bond matures or you sell the bond. While many bonds are sold by large public companies, some private bonds are community-focused and can support the growing American company. These bonds are part of an innovative new asset class, some of which pay up to 5% annual interest. Instead of the proceeds from the sale of bonds to a large company to finance its own growth, the proceeds from these community bonds are used for a variety of secured business loans and investments, including real estate, CDs, government bonds, and more A diversified investment is already a bond. Regardless of whether you invest $ 10 or $ 10,000, you can invest with a 5% return.
What is a share? A share, a share or an equity represents the ownership of a fraction of a company or a company. This entitles the owner of the share to part of the company's shares financial assets and profits correspond to the amount of shares they own. Most of the money you make from stocks is either raised by increasing the stock price or by paying dividends. Both stocks and bonds have different price, risk and return levels. Generally, bonds are considered attractive because they offer more predictable returns than stocks whose value can fluctuate.
Historical, alternative investments were less liquid than traditional investments – it's not as easy to sell a classic car, property, or commercial loan stake as trading a stock – so this was another obstacle for retail investors. However, this is changing now that innovative ways have developed to access these asset classes through new financial instruments such as private bonds and non-trade real estate REITS. It was not just security advances Regulations, but it also required technology to bring these new offerings to market. Financial technology platforms that enable the digitization and distribution of private market securities, especially those that enable partial or small investments, have opened up a whole new world of options for private investors.
But we have some catching up to do. The portfolio allocation for alternatives among individual investors is currently less than 10% on average, compared to around 30% for the institutes (and much higher for the largest university foundations). With the rise of these new asset classes, we can now Access the types of institutional quality investments that the rich have always had and enable us to achieve real financial growth.
So the next time you're looking for a place to keep your money, think about the region. Consider adding returns with higher returns. Community-based investments to your portfolio. Everyone deserves economic security. If this can be achieved while generating both financial and social returns while protecting your money from stock market slumps, this is a home run!
Sally Outlaw (1 items)
Sally Outlaw founded Worthy Financial to offer the public high-yield alternative investments. Your personal and business mission is an economic opportunity for everyone. Worthy used newly updated securities regulations to give everyone the opportunity to save painlessly while earning 5% of their money – while doing so as they help businesses in the community grow. For more information on Worthy's efforts to build a more inclusive economy, go to social media.