Thursday, 3 January 2013

More Investors Leave Traditional Investing For Alternatives


When analyzing the markets for investment opportunities, it can be a confusing and frustrating experience, for the average investor. That is why investors generally trust investment advisers  to make the right investing decisions on their behalf, since they are considered to be the most educated and experienced. Unfortunately for many investors, over the course of the last five years, many of the financial experts have turned out to be wrong in their speculations and it has cost investors billions of dollars; as a result. This has led to a significant shift in global investor confidence, leading many over to alternative investments and away from traditional investing strategies.

If you take a moment to review these two main investing options, the reasons that investors are flocking to alternative investments (hard assets in particular) and away from the traditional options; will become more and more apparent. Above all, it seems that the number one reason for the shift to investment alternatives, is the options' impressive track record, across the globe. For example, a comparison between shipping container investments and traditional stock market performance since the western financial crisis first began in 2008, has shipping containers returning above-average returns while stock markets have remained relatively flat; over the same time period. Many investors would consider that to be a pretty good reason right there to choose hard assets over stocks. One sector consistently delivers profits, while the other simply has not been performing.

Who can blame investors for abandoning their traditional methods if they aren't producing the desired results? After all, investing all boils down to revenues, income and profit at the end of the day. That is all that investors are concerned about in the first place. One other main point of difference between the two investment sectors, is the fact that they are not directly tied to each other, in the overall global economy. In other words, when stocks are down, alternatives investments are not affected by the adverse shift in the market's performance. In fact, history repeatedly shows that hard asset demand increases, each and every time the market struggles. Judging by the overall unstable and unreliable state of the global markets these days, it looks as though it could be a long time, before investors regain their trust and confidence; in any of the world's stock markets.

2 comments:

  1. The reason why investors tend to stick with the traditional investments comes down to one main thing: inertia. Its' essentially the path of least resistance. Plus, if they use a stock broker, is it really surprising that their broker will be flogging, well, stocks (duh). Ultimately though, the fault lies with investment advisors for not taking the time to educate their clients about other options out there. For example, the blog author Mr. McCalman proposes a couple of interesting solutions in just his last two posts, with such non-financial "hard assets" such as diamonds and shipping containers. Both, by the way, are great plays on China's growing economic power and trade. And for what its' worth, I think diamonds, especially colored diamonds, have a much higher upside then gold! This does not mean rushing out and putting 100% into these alternative assets, but even a reasonable 10-15% allocation will add tremendous diversification to a portfolio, and its' a bloody shame most retail investors are just not hearing about these options (sigh).
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