No, this is not a reference to the Sarah McLachlan song about cowboys; although, depending on how your portfolio is invested, you may have a better chance of finding a cowboy than finding a gain in your investment accounts.
Throughout the 1980s, mutual funds were seen as a risky investment and not many people were willing to contribute their hard earned money to such a “crap shoot”. Since then, these investment vehicles have come to be known as a great diversification tool with great growth (or loss) potential. Well, how do you feel about them lately?
Granted, over the long term, these products are designed to generate decent sized returns. As the past 20 years have shown, your money can do quite well in mutual funds. They provide a way for the average person to invest in many companies with any amount of money. This type of diversification is great as a whole, but it may not amount to much if the entire market/economy happens to be scrapping the bottom (at least we hope it’s the bottom). Could there possibly be a way to potentially eliminate the constant ups and downs of today’s market and still provide you with the opportunity to participate in fairly large capital gains (profits)?
Welcome to the world of alternative investments. Alternative investments? Is that like that alternative medicine stuff? No, and you don’t need a witch doctor or voodoo doll to facilitate the deal either. Put simply, these types of investments allow the common investor to participate in institutional quality offerings. These offerings range from investments in land (any one of the four stages of real estate), to oil and natural gas, to equipment leasing.
Before you snicker and toss this article in the trash, allow me to explain what I am talking about. Just as mutual funds seemed too risky for everyone back in the crazy days of the ’80s due to the lack of exposure to the public, these “alternatives” also scare away those who could benefit most from them.
The truth is that many of the companies that provide these opportunities are established, well structured companies with enormous potential. Large investment firms, insurance companies, and even college endowment funds have been taking advantage of these types of investments for years. Now, through independent financial advisers, many normal investors can also reap the benefits of these offerings.
As I mentioned before, the structure of these vehicles differ from stocks, bonds and mutual funds in that they do not fluctuate with the stock market. These companies have developed solid business models and allow you to participate in potentially outsized gains. One of the more basic examples aims (and has succeeded thus far) to pay out interest at a rate of 9.75% per year! Compare that to CDs, money market accounts and savings rates and you will see a difference of over 6.5%! And this is only one of many options.
The moral of the story is this: Just because the vast majority of people are 100% invested in the stock market, does not make it the right thing to do. As the saying goes, “If everyone was jumping off a 1,000 foot cliff, would you follow suit?” Take a look at all your options before you conform to the status quo. You might realize that there is more to investing than the inevitable ups and downs of the stock market.
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