Anything but stocks or bonds
Anything but stocks or bonds is an easy working definition. The popular trends are to use alternatives that are marketable, such as a mutual fund or a stock or bond. However, this paper is only going to talk about the alternatives that are NOT stocks or bonds. In this case, I will be reviewing how market loans, real estate, private equity and even angel investments in start-up businesses are superior choices as alternative investments. Learn more
Market loans
Market loans are loans from people to other people or small businesses. Banks have normally filled this liquidity need, but because they are either unable or unwilling to do this today, the public investor (the market) is now doing this instead. Investors can find 45-90 day liquidity and with a prudently diversified portfolio of non-leveraged and leveraged loans across a wide spectrum of deals easily earning a range across many categories of 6% to 12%, or more in many examples. Learn more
Real estate
Real estate is a classic investment with both equity and debt characteristics. Growth rates for real estate can compete with stocks by carefully performing due diligence to select superior management. Learn more
Private equity
Private equity is typically a plan for investors to buy small businesses and then expertly managing the company for growth that the previous management was not performing. The plan is to borrow heavily to buy the business then paying down that debt with increased profits. Ultimately, the plan is to sell in 5-7 years with what is now less debt and at a profitable price. Many deals designed with this model will project much higher returns than we would normally expect in the public stock market. Learn more
Angel investments
Angel investments in start-up businesses have enormous business risk but this normal risk can be mitigated using diversification techniques. Angel investors enjoy many benefits including active management using legal insider information resulting in much higher expected returns including adequate diversification. Start-up businesses with disruptive ideas have dissimilar price movement to almost everything in the world and make available a HIGH impact investment opportunity where clients of advisors will know they are doing well while doing good. There is also the great personal gratification of being at the foundation of something that will change what is normal in business and where your skills and experience are valuable as a consultant or advisor to the CEO. It is of no small consequence that Section 1202 offers angel investors a way to qualify for tax free gains at exit, which can make it the most tax-efficient, investment category available. Active angels truly utilize all their experience and skills while being intimately involved in each business deal. Average returns reported for this class of investments exceed 2X what is normally expected in the public stock market. Learn more
