|
Diversification Outside of Real Estate Investments
Right now, real estate investors face tremendous challenges in
determining how to best invest their assets. They may be preparing for
a rough ride until the market turns and real estate investments are
once again profitable.
Dispelling Investment Myths
Real estate investors have long held the belief that for non-real
estate investments high volatility is a necessary evil to achieving
long-term returns of 10% or higher. Traditionally, the view has been
that there are not many safe ways to diversify assets beyond a mix of
U.S. stocks and bonds, international equities, and REITs.
Even amid a turbulent real estate market, it is possible to increase
returns while mitigating risk and decreasing volatility. By adapting
the strategies of the largest, smartest investors, it is possible to
enjoy higher returns – without enduring high volatility in your
portfolio.
The Wisdom of Major Endowments
Utilizing an institutional asset allocation model based on investment
principles used by some of the largest universities and endowments can
yield above-average returns with reduced volatility. Institutional
investments employ diverse investment strategies not typically seen in
many individual portfolios, including venture capital funds, managed
futures vehicles, commodity funds, long/short equity funds, and
absolute return strategies.
The top 765 endowments have combined assets of more than $340 billion.
Together, the endowments of Yale and Harvard are worth more than $46
billion. Over the past twenty years, major institutional endowments
achieve above-market returns through a use of alternative assets, which
are not directly correlated to the movements of the stock market. Their
portfolios are more diversified than the typical portfolio, resulting
in decreased volatility and more steady returns. The average endowment
of over $1 billion contains 37% of its portfolio in alternative
investments. The net-net is participation in a rising market while
mitigating instability on the downside through the adaptation of short-
and long-term equity models.
Adapting Institutional Asset Allocation Models
So, how can the average investor benefit from the strategies that major institutions have known for years?
By adapting similar strategies, individual investors can enjoy the same
upstream participation of a bull market while mitigating volatility.
Your investment portfolio might employ the following distribution: 30%,
traditional equities; 20%, traditional fixed incomes; 25%, managed
futures and equity alternatives; and, 25%, absolute return strategies...
continue...
More about Neal J. B. Simon
No comments posted on this article.
Comments on this article have been closed
|
|
|
News Feed 
Tag This Page
