November 10, 2022

Should Young Investors Consider Alternative Investments?

A recent survey from the Bank of America found that 75% of young investors agree it’s “impossible to achieve above-average returns solely with traditional stocks and bonds.”[1] The study outlined that 80% of young investors are looking into alternative investments including private equity, cryptocurrency, and real estate. Let’s answer a few questions about alternative investments.

What are alternative investments?

Alternative investments include investments that are outside the realm of public markets. They include things like private equity, infrastructure, farmland, real estate, hedge funds, and cryptocurrency.

Why are more investors considering alternative investments?

The typical investor has a portfolio that consists of stocks and bonds. Alternative investments have historically exhibited lower correlation to stocks and bonds, meaning they do not follow the same pattern of returns. This can provide investors with diversification, downside protection, and volatility dampening.

What should I consider before investing in alternative investments?

Stocks and bonds are available to trade on public markets and reflect a market price daily. In contrast, alternative assets are generally less liquid and require investors to “lock-up” their money for long periods of time before being able to access it. The private nature of alternative investments also requires investors to exercise greater due diligence before making investments and ensure that they understand their risk tolerance and liquidity constraints. It’s best to speak with a professional before investing in alternative investments.

Unfortunately, alternative investments have been historically inaccessible to the average investor, due to higher minimum investment requirements. At Northfront, we understand the benefit that such investments can bring to the traditional investor’s portfolio and have designed a way to democratize access to quality alternative investments through the Northfront Alternative Asset Fund. If you would like to learn more about our approach and diversified investment portfolios, please connect with us.

About Northfront Financial

Northfront Financial, based in Calgary, Alberta is a boutique full-service financial planning firm serving professionals and business owners. We pride ourselves on being a different kind of investment firm. This stems from our humble roots, entrepreneurial spirit, and a culture of integrity and professionalism. Our goal is to offer the best investment products, services, advice, and ideas the financial industry has to offer from our experienced team, which includes individuals with the Chartered Financial Analyst® (CFA®), Chartered Investment Manager (CIM®), and Certified Financial Planner™ (CFP™) designations.

 

[1] https://newsroom.bankofamerica.com/content/newsroom/press-releases/2022/10/bank-of-america-private-bank-study-finds-younger-investors-turni.html

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