Thursday, 9 May 2013
Alternatives Offer A Great Hedge Against Market Volatility
There are two words that send shivers down the spine of every stock market investor. Market volatility. This is because the global stock markets are directly tied to the inflation rate. Whenever the inflation rate rises, the overall stock market values go down. In the last five years, the markets have been extremely volatile in the wake of the western financial troubles that had a devastating effect to the global markets and crippling many world economies. Millions of investors lost billions of dollars leading to (what some people are calling) The Great Recession of the 21st century. Unfortunately, there are still some lingering negative effects, as the latest developments in the Europe clearly illustrate, particularly highlighted by the financial problems experienced in Greece and Cyprus.
There once was a time not long ago, when the only choice investment-seekers had was to take a gamble on the stock market and fill their portfolio with shares. Thankfully that strategy has become less popular with the emergence of alternative investment options, that are proving they can consistently outperform the traditional offerings. Nowadays, investors have lost their confidence (not to mention a lot of money as well) in the traditional methods of investing and are beginning to take advantage of the many profitable alternatives, dominating the investment landscape.
Most alternative investments are not correlated with stocks and bonds and as a result are not negatively affected when the inflation rates go up. In fact, the opposite happens. Their value actually increases making them a great addition to any investor’s portfolio. Many established investment advisers and firms are now strongly recommending that a well-balanced portfolio contain a large measure of alternatives to protect it against under-performing stocks and volatile market conditions which lead to high inflation rates.
The investment landscape is definitely undergoing a massive shift as global alternative investments are now valued in the trillions of dollars annually and the trend is expected to continue for years to come as the global economy grows. For the longest time, the traditional method of investing into stocks and bonds ruled the financial world. While they did not always deliver a great investing experience, for investors looking to grow their money, they were the only option at the time. Nowadays, times are changing as investors now have a much wider range of many profitable alternative options to choose from.