The world’s most successful investors are the ones who call their own shots. Instead of letting analysts and fund managers crunch data to devise complex algorithms that ultimately disappoint, sophisticated ultra-wealthy investors take a different approach and buck the Wall Street trend.
The Failure of Wall Street’s Mainstays
For investing and planning for retirement, most investors rely on Wall Street’s mainstays. They follow tradition and rely on the same strategies they’ve been taught their entire lives by family, schools, and the workplace. They rely on Wall Street mainstays and fall-back strategies such as mutual funds, 401(k)s, and using financial advisors and planners. However, these professionally managed strategies are not only insufficient but often leave your portfolio at the mercy of external forces and market drivers.
To secure and grow your wealth effectively, consider bucking tradition and Wall Street. Consider investing in private alternatives where you have greater control and potentially higher returns.
Who Really Controls Your Portfolio’s Valuation?
When you look at your investment portfolio, it’s easy to assume that you or your financial advisor control its valuation. While you might decide on the assets to include, the actual valuation is influenced by numerous external factors. Economic news, geopolitical events, and market speculation can drastically alter stock prices in an instant. This is especially true in the current environment, where fear and uncertainty dominate.
Most investors underestimate the vulnerability of the stock market to a variety of market triggers that can send shock waves through the market. Factors such as inflation, rising interest rates, recession fears, the news cycle, social media, and market indicators can all play a significant role in market volatility.
How the Wealthy Allocate
Market unpredictability and the lack of control over one’s own portfolio are what drive savvy investors to consider alternative investments for a portfolio capable of creating, growing, and accelerating wealth.
Consider the asset allocation of one such group of sophisticated investors:
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Who is Tiger 21? Tiger 21 is a peer network of ultra-high-net-worth investors who collaborate on the topic of investing. $50 million in investable assets is required to join the group, and each quarter, Tiger 21 publishes an asset allocation report detailing how its members are investing.
There are two assets that continually dominate the top of the Tiger 21 asset allocation chart: private equity and commercial real estate. Like most ultra-high-net-worth investors, the members of Tiger 21 consistently allocate more than 50% of their portfolios to private equity.
The Problem with Active Managers
Actively managed funds and portfolios struggle due to the futility of market timing and the inherent volatility of stocks. Moreover, actively managed funds and portfolios come with management fees and commissions that further erode returns. This raises the question: why entrust your money to these funds and their ineffective analytics and algorithms when you could achieve better results by taking control of your portfolios through private investments?
Why Private Investments Offer Greater Control
Given the volatility of public markets, wise investors are turning to private investments. Unlike public markets, private investments are less susceptible to external triggers and market herding behavior.
They offer:
Control Over Valuation.
Private investments allow you to place the valuation of your portfolio in the hands of the assets and the companies you invest in, with trusted managers working to build value over time.
Predictable Returns.
By partnering with experts in the private market insulated from market volatility, you can achieve better, more predictable returns.
Protection from Market Volatility.
The illiquidity and long lock-up periods of private investments shield your portfolio from the chaotic swings of the public markets.
The ultra-wealthy have long understood the benefits of private investments such as private equity and real estate. Not only do they offer superior returns, but they do so at less risk.
Why Passive Private Investments?
Partnering with experts to invest in private companies and real estate allows smart investors to not only control the direction of their portfolios but also achieve other advantages not found in the public markets.
Higher Returns and Less Volatility.
Private companies are not subject to the same market pressures as public ones. They can make swift decisions without the scrutiny of shareholders and regulatory bodies. This flexibility, combined with lean operations and focused management, results in higher risk-adjusted returns.
Transparency and Alignment of Interests.
Private investments often involve closer relationships between investors and management, ensuring greater transparency and alignment of interests. Investors can actively participate in the growth and success of their investments.
In today’s digital age, the stock market is influenced by factors that didn’t exist 30 years ago. Free trading platforms like Robinhood allow anyone with a bank account to trade stocks within minutes. This ease of access and liquidity means that large market movements can be triggered by both economic news and online hype, rumors, or social media trends.
In a world where market volatility is the norm, taking control of your investments through private alternatives is a smart move. Shifting your focus from traditional Wall Street strategies to one centered on cash-flowing alternatives like private equity and real estate can mean the road to wealth.
The path to financial independence lies in taking control of your portfolio to make informed, strategic decisions about where and how to invest your money instead of putting it in the hands of algorithms and analytics.
Take the leap and embrace private alternatives to join the ranks of the ultra-wealthy.