At Jupiter Wealth, we focus on the needs of wealthy families and high-net-worth individuals throughout the Denver area in terms of guiding their wealth management. The fact that the climate in today’s marketplace is highly turbulent concerns investors, who worry about earning the returns they expect while protecting portfolios against undue exposure to risk.
This is where alternative investments step into play. Sophisticated investors look for ways to diversify that add real power to financial strategies through alternative investments.
What Are Alternative Investments?
Alternative investments are asset classes that lie beyond traditional equity, fixed income, and cash. These assets offer unique opportunities for growth and diversification, often reserved for those with access to specialized financial resources.
Examples of alternative investments include private equity, venture capital, hedge funds, real estate, commodities, and cryptocurrency — though it’s worth mentioning that cryptocurrency is a very niche choice for very risk-tolerant investors due to its extreme volatility and regulatory uncertainty.
Unlike traditional assets, many alternative investments have a low correlation with standard market performance; hence, they may also act independently of stock or bond markets. It is for this reason that they become so attractive to high-net-worth investors in times of turmoil.
Benefits of Alternative Investments to High-Net-Worth Investors
Alternative investments offer a host of very compelling advantages for the high-net-worth investor, making them a valuable complement to a well-rounded portfolio.
Diversification
Alternative investments can reduce portfolio risk by offering exposure to asset classes that don’t move in tandem with traditional markets. For instance, when the economy is down, and stocks decrease in value, real estate or commodities may retain their value or even appreciate. This helps balance some losses from one area with some gains in another, thus increasing overall portfolio stability.
Potential for Higher Returns
These investments offer the potential for returns unavailable from traditional asset classes. Private equity and venture capital can reap considerable returns through their investment in early-stage companies that promise future growth or a buyout. Though higher returns are never guaranteed, attractive alternative investments may bring greater rewards to those willing to take higher risks.
Access to Unique Opportunities
High-net-worth investors have access to opportunities such as hedge funds or private placement, which generally are not open to most investors. This enables investments in businesses and markets that many other portfolios cannot touch. Therefore, you can select assets in innovative industry sectors and up-and-coming niche markets.
Hedge Against Inflation
Many alternative investments naturally hedge against inflation. For example, the value of real estate and commodities often increases in an inflationary environment. They protect against the loss of purchasing power brought about by rising prices. Thus, they attract considerable interest when traditional investment values decrease due to inflation.
Considerations for Including Alternative Investments in a Portfolio
While alternative investments offer exciting benefits, they also come with unique challenges. Understanding these factors is important before adding alternative investments to your portfolio.
Liquidity
Many alternative investments are not particularly liquid (i.e., easily converted into cash). Your money might be tied up for years. In fact, most private equity funds have long holding periods before realizing high returns. This may become a problem in cases where you need cash quickly.
Fees
Another consideration is higher fees. Most alternatives have management and performance-based fees that can reduce net returns. You need to weigh these fees against potential benefits to assess whether the investment aligns with your financial goals.
Investment Minimums
Most alternative assets have high minimum investments, making them less accessible to investors who do not have a high net worth. These minimum buy-ins limit access to those select few who have large resource pools. However, they require careful planning to keep your overall portfolio in a healthy balance.
Risk Tolerance
Alternative investments have increased vulnerabilities, including market volatility and business failures. Assessing your risk tolerance with a financial advisor can ensure these assets are suitable for your goals. This step will help you avoid overexposure to high-risk investments that might jeopardize your overall returns.
How Jupiter Wealth Can Help You Integrate Alternative Investments
Alternative investments require knowledge and planning. Our wealth advisors first analyze your goals, risk tolerance, and portfolio composition before devising a custom investment strategy suited to your specific needs.
At Jupiter Wealth, we are proud to serve as trusted wealth managers in Denver. We also connect clients to a wide range of alternative investment opportunities in private equity funds, real estate ventures, and other exclusive options. Our experienced Denver investment advisors provide a balanced viewpoint where the chosen assets have excellent return potential while minimizing the associated risks.
Want to Learn More?
Alternative investments in Denver provide a compelling tool for diversification, higher returns, and access to unique financial opportunities for high-net-worth investors. At Jupiter Wealth, we are committed to helping you attain your financial goals through the appropriate allocation of assets. We invite you to schedule a consultation today with one of our financial planners in Colorado to discuss how alternative investments can benefit your portfolio.
