After the US goes through a recession, most people focus on the negative. If you ask around, many people will tell you that the economy is in shambles, and the recession is hurting us all. However, if you look up what is going on, you will see that the stock market is near the highest it has ever been. The housing market has recovered, and the only thing that is still lagging is the job market. The recession technically ended in 2009, but many people think that it is still ongoing. The US actually experiences a recession every 7 – 10 years. This means we are approaching the next one (many experts think it will be in 2016 or 2017. In order to prepare for the inevitable downfall in the market, alternative investment strategies may be the best thing for your portfolio.
If you are wondering “what are alternative investments?” then read on.
Commodities
Every portfolio should have commodities. These investments generally act independently of the market, since commodities are something people need regardless of what the current state of the economy is. While most portfolios have 2-5% invested in commodities, some like to balance out higher risk investments by upping their commodities holdings. Keep in mind, however, that commodities do go up and down.
Real Estate
When many people think of investing in real estate, they think of purchasing physical property and trying to flip it. While this is one way to make money (although not recommended if you do not explicitly understand the market in your area), there is a better way. ETF’s, Mutual Funds, and some stocks are heavily invested in various mixes of properties, mortgages, and rentals. As the real estate market booms in the next year, consider adding more to your portfolio.
Energy
There are constantly news articles popping up about the latest in the energy trades. Journalists are reporting on everything from Fracking in the Bakkens to coal being used in China. Energy is a hot topic, and will always be a necessity. If you want to boost your portfolio with this alternative investment, do a little research as to what is growing, and focus in on one specific niche. Coal, oil, gas, and renewable energies make up a large share of the alternative investment markets.
Currencies
Several years ago I looked into Forex trading. At the time it seemed appealing, however, I just could not quite get a grasp on it. It felt, to me, too much like taking a wild stab at which currency would increase in value relative to the dollar. Since that time, however, the market has opened up a little more. You do not have to just buy and sell the currency, but you can buy into a fund that will do the trading for you. World currencies are always on the move, and if you feel adventurous, there is always Bitcoin as well.
Futures
There are certain parts of the market that require a little more understanding than others. Futures is one of the areas that I certainly have not fully wrapped my head around. They make up a huge part of the financial markets, and are loved by many investors not only for their potential returns, but also the ease of getting in and out. Take care though, these carry quite a bit of risk.
Also consider the advantage of analyzing market trends. This method may not be 100% foolproof when predicting the future, but it is helpful information to have. Sites like TrendsInvesting will let you search for both upward and downward trends in terms of funds or stocks. You can even search for absolute trends or trends related to S&P while adjusting the time frame in which you view them. There is no telling how any markets will fare in the future, but you may gain a greater understanding by analyzing their history.
2014 is looking like it will be another great year for investments. The ups should be higher than the downs, and many people are hedging their gains by spreading their money into different investment strategies. While dollar cost averaging into your investments is not a bad idea, looking into these alternative markets might help to boost your gains even further.
Do you invest in alternative markets? What has your experience been?
I don’t invest in any of these things (I don’t consider my primary residence as an investment, even though we/the bank owns our home; after all, it doesn’t really meet the investment criteria), except for maybe commodities because I am sure my portfolio has a handful of them.
I’ve made far more money in carefully selected hedge fund and private equity funds than I’ve ever made in the listed market (going direct or via mutual funds).