Most investors are familiar with the common asset classes in the marketplace today. Stocks, bonds, and mutual funds are the traditional assets that most investors have heard about. They are recommended by websites, magazines, and financial professionals. If you checked the retirement accounts of most investors, most of them would be invested in these three assets classes, or holding cash. While these asset classes are important, and should be a large portion of your portfolio; there are other investment options available to investors that they may be overlooking. Let’s take a look at a few of them.
Hard assets have a place in the portfolio of investors because they are typically inversely correlated to traditional assets. During the last big recession, assets like gold held up well, while stocks and bonds were crashing. For this reason investors should allocate a small portion of their portfolios to hard assets. Gold, silver, and platinum could represent as much as 10% of the portfolio of individual investors. This way you can have stable returns, while the sky is falling all around them. Hard assets are also an effective hedge against inflation. Precious metals have risen dramatically in recent years because of feature of the rise in inflation. It is possible to put hard assets in retirement accounts. APMEX is one such company that sells gold and silver products that you can store in your traditional brokerage account. APMEX even has a precious metals IRA that can be stocked with gold and silver bullion. It’s a nice way to get defensive against big market swings.
Soft commodities are another asset class that should be looked at. Soft commodities come from the ground often perform as well as hard commodities that have to be mined for. Commodities are another type of alternative investments that do well during inflationary times. You can invest in agricultural products which have been on a tear recently. Products like cotton, sugar, and cocoa have done quite well as speculators have bid up these assets. They will always be in demand as these products are staples of the American life.
The good thing about natural resources is that there is a finite supply which makes them so valuable to investors. Any concerns about the level of supply of a natural resource and natural resource prices are off to the races. Take crude oil for an example. Energy has been a high growth area and will continue to be for the foreseeable future. You have seen how crude oil has taken off since the troubles in the Middle East started occurring. Investors can buy crude oil futures, or invest in the asset itself through an ETF (exchange-traded fund). There are lots of alternative energy investments like solar power which could benefit from a change in energy demand. All of these alternative investments offer investors greater diversification, and should be part of your asset allocation. While alternative investments should not make up the bulk of a portfolio, they can contribute to the growth of an investment portfolio even as a small holding. You can either purchase these alternative assets directly, via futures, or by ETFs and ETNs are available.