Across the world, we are seeing instability, not just in economic terms, but politically too. In both the U.S. and UK, political turmoil is becoming the norm, with one disrupting the North American continent and the other the EU.
This means an uncertain future for the stock markets around the world. While we can’t be sure what the end result will be of this instability, we do know that for stocks, the uncertainty of this level results in poor performance.
Investment is reduced as business seeks to protect itself, and that means, as we have seen recently, markets underperform.
When stock markets underperform, if that is all you invest in, then so does your portfolio. But with alternative investments, you can still make money. Whether that be investment vehicles that do not follow the same trends as the stock markets or assets that allow you to profit from falling as well as rising markets, the reasoning is clear.
By incorporating viable alternative investments into your portfolio, then you are able to maintain growth even when your stocks are struggling.
There are many options for alternative investments, but as an example, look at currency markets, or Forex as it is commonly known. The Forex markets consist of various currency pairs, such as AUD/USD, and the exchange rate between the two.
You will have experienced this if you have ever left the country, the amount of local currency, such as US$ you receive for your AUS$ is the exchange rate, and the change in those rates is the Forex market.
Now think about those rates, do they track the stock market? Forex markets are global, so while the economic situation in a given currency does affect its value, overall, the Forex market is diverse and large enough to work to its own trends.
That means, if stocks are stagnant or falling, a currency pair somewhere will be going in a different direction. That means a chance of investment growth even if your stock investments are not doing well.
Forex is a great example of the way alternative investments can allow you to counter stock investment performance because it also allows you to profit from falling markets.
Shorting a currency pair means taking a position that profits if the price goes down, and along with a few other alternative investments, such as Contracts for Difference (CFDs), that means a chance to grow your investment in almost all market conditions.
Again, the reason this is important is that it provides an avenue for continued profit where stocks are struggling. Of course, while these alternatives allow for increased ways to profit, there is an increased risk to go alongside it.
However, a balanced portfolio would see a split between stock and alternatives, allowing a managed approach to that risk while taking advantage of the benefits.
Low returns and an uncertain future for traditional investment asset values mean diversification should be an important part of your portfolio strategy today.
Alternative investments allow you to find profit opportunities that have the potential for growth even as stocks struggle.
For the full breakdown on why Australians should invest in Alternative Investments, check out our article: Why Alternative investments should be part of your portfolio?
We welcome you to schedule a time and one of our advisors or give our advisors a call to discuss your investment goals and objectives.
You can call Walker Capital Australia on +61 2 8076 2210, and we’ll see how we can help you achieve your investment goals.