These Two “Alternative” Assets Will Protect Your Money From Covid Volatility and Fallout
I’ve been in the investing game for two and a half decades now…
WHAT! “Ann you don’t look a day over thirty I can hear you say..”
Vanity aside, time IN the market and building and preserving my wealth through all sorts of wild market rides has taught me a few things.
The biggest lesson being… diversification!
Monogamy is NOT your friend in the world of wealth 😉
Something that’s been a bedrock of my wealth creation from day one.
Stop trying to find “the right investment”, “the one thing that’s going to make you a mint and rescue you from financial oblivion”, “the wealth creation silver bullet”
There is no such thing!
There also isn’t “the better asset class to be in”
Nor is there “a right time to invest”
Actually there is.
The best time to invest was 20 years ago, the second best time to invest in NOW!
Since I’ve been investing, through the past 25 years, my diversified multi-asset portfolio has averaged an annual return of 21.7%. By comparison, the S&P 500’s average annual return during the same time frame was just 13.2%.
But that’s all in the rear-view mirror now.
What matters is how we design our investment portfolios to deal with the uncertainty and wild volatility we will continue to experience for a while to come.
I recently updated my Multi-Asset-Class Risk-Assessed Portfolio Framework which is the guide I use to determine how much of my investments will be held in each asset class and then within subsectors of that asset class.
I want to know I have a broad based portfolio that can withstand whatever life and market throws our way. And I want you to have this too.
Yes it is all about the base, LOL.
A massive part of financial freedom is financial peace of mind.
No matter the size of your net worth, if you are constantly anxious you could lose it all, there is NO freedom in that.
To get the best possible return AND have peace of mind, you need to diversify the asset classes in your portfolio.
Greater diversification and robust asset allocation results in lower risk and better protection for your money.
So today, I’ll share three “alternative” assets that you won’t find in the archaic 60/40 portfolio model (60% equity / 40% bonds) along with why every investor should consider adding them to their portfolio.
I am bullish on cryptocurrencies, I believe blockchain technology has a massive contribution to make and I think everyone needs to add a little crypto exposure to their portfolios.
You see, cryptos are proving to be uncorrelated to the markets.
In other words, their movements aren’t tied to the stock market or overall business cycles…
Correlated assets move together in price direction.
Shares in companies, even though they might be in different sectors like healthcare and industrials, or in different geographic zones like the USA and China, tend to move in the same direction, because they are impacted by the same external influences. Generally emotional reactivity.
And inversely correlated assets move in opposite price directions.
Different types of investments that moved in different market cycles.
For example, when the U.S. dollar goes down, gold prices usually go up.
Equities (shares in companies) and real estate were always considered uncorrelated. But in reality, since most people invest in real estate (investment property) through property funds and REITS, that trade on the stock market, the price movement of these two asset types tend to move in the same direction as each other.
They too are usually affected by the same events.
But uncorrelated assets aren’t affected by outside forces.
And the financial industry is starting to realize that the price of bitcoin is unrelated to the prices of gold, stocks, bonds, real estate or commodities.
Plus, a study last year by Bitwise Asset Management concluded that allocating just 1–10% of your portfolio to bitcoin gives better risk-adjusted returns than holding just stocks and bonds.
Like cryptos, gold is also an uncorrelated asset class.
When equities zig, gold zags!
The key to diversification is finding investments that are not closely correlated to one another; gold has historically had a negative correlation to stocks and other investment types. Recent history bears this out:
- The 1970s was great for gold, but terrible for stocks.
- The 1980s and 1990s were wonderful for stocks, but horrible for gold.
- 2008 saw stocks drop substantially as consumers migrated to gold.
- And 2020… gold is having one of its biggest gains in history.
Gold is interesting because it doesn’t produce income and it’s price is completely driven by supply and demand rather than the underlying value of the asset gowing, which is the fundamental base of a stocks capital value gain.
So what gold actually is is a wealth preserver, rather than a wealth creator, and this is exactly what we need in our portfolios.
Diversification Is Your Shield
Adding cryptos and gold to your portfolio will stabilize your portfolio and help you ride the volatility storms that will keep hitting us for a while to come.
They will also help you generate inflation great long-term returns … and help you lower your overall risk by putting money outside the volatile markets.
Crypto and gold are two of the 8 Asset Classes in the Multi-Asset-Class Risk-Assessed Portfolio Framework I use to design and manage my investment portfolio.
I’ll be sharing this framework on a free live training, Monday September 7th.
Go here to get the details and secure your place.
A well diversified and strategically asset allocated portfolio creates your freedom.
It’s our job to bring them into our lives and give them the structure to thrive so they can serve and support us.
P.S. This is probably the most important training you’ll attend all year. Do whatever you can to be there so you can learn the model and make sure your portfolio is robust and ready for the decade ahead.
Go here to register and secure your spot.