Recent economic and social unrest have forced many investors to reassess their financial condition and portfolios.
Unfortunately, Wall Street diversification hasn’t worked out as planned for many investors who have seen their portfolios wrecked by recent turmoil in the markets.
The problem with Wall Street diversification is that diversifying across a variety of stocks in a variety of industries does you no good if the whole house burns to the ground.
Not all investors have suffered recently.
There is a class of investors that tends to weather these types of economic storms better than others. These investors are the ultra-high-net-worth investor (“UHNWI”) – individuals with a net worth of at least $30 million. The UHNWI learned long ago not to rely on Wall Street to build wealth.
UNHWIs gravitate towards alternative investments to avoid Wall Street volatility – investments like private debt and equity, direct private investments, commercial real estate, commodities, agriculture, and productive businesses.
Why these types of assets?
Because they fit within the narrow economic fundamentals driving investment choices – those being:
- Consistent Income
- Tangible Assets
If an investment opportunity has those three economic fundamentals, there are very few places or asset classes that UHNWIs will not consider for investment.
Because accessing new markets and new asset classes can achieve the types of diversified returns not possible with a narrow investment strategy.
This is why you should be open to accessing new markets and new asset classes:
Higher ROI –
Looking beyond our shores to exciting emerging markets may present higher ROIs that local and domestic markets that have plateaued may not match.
A younger, hungrier demographic in an emerging market in Latin America or Southeast Asia may have more potential upside than the more mature markets in the U.S. and Europe.
Recent social unrest makes a strong case for accessing new markets and asset classes. Before the recent social unrest in the U.S., you may have never considered investing in cacao farms in Panama or teak plantations in Nicaragua. Still, you can undoubtedly see the merits of a global investment worldview now.
As the saying goes, you should never put all your eggs in one basket. It’s not true that as one market goes, the whole market goes. This is especially true when investing in foreign markets and multiple asset classes.
Even during the Great Recession, while the world as a whole was in the depths of a serious financial crisis, some countries and markets were less affected than others, and domestically, there were asset classes that thrived in the face of economic despair.
Even now, as the U.S. is officially in recession territory, there are offshore markets and domestic asset classes that are still thriving – markets and assets unaffected by Covid-19 and riots on U.S. streets.
Investing across markets and asset classes allow your investments to balance each other out. If a local market stumbles, a foreign market can pick up the slack. If a certain asset class struggles with cash flow, another one will fill the income void.
Ground Floor and Off-Market Opportunities –
If you don’t look outside your geographic and asset class box, you may miss out on ground floor opportunities in up-and-coming markets, or you may fail to discover and capitalize on off-market opportunities in another asset class.
If you limit yourself to local opportunities in asset classes that attract far more competition than ground floor or off-market opportunities, you are only limiting your potential for significant gains.
For some, investing beyond the walls and familiarity of Wall Street takes a leap of faith. UHNWIs are happy to take this leap, but they don’t do so blindly. They take risks, but their risks are calculated – grounded in sound investment principles.
In the pursuit of cash flow, appreciation, and hard assets, the ultra-wealthy are happy to explore new markets and asset classes.
By expanding your investment horizon beyond your local markets and beyond familiar asset classes, you can achieve the financial freedom that you crave more quickly and securely.
Have you assessed your portfolio and investment strategies lately?
Are you doing things to protect yourself from current and future market volatility?
Will your investments continue to cash flow and grow your wealth under any economic conditions? If not, maybe it’s time to consider new opportunities in new markets and new asset classes.
Kyle Jones is a co-founder and Key Principal of TruePoint Capital, LLC. Kyle is responsible for the company’s strategic planning, investment decisions, asset management, and overseeing all aspects of the company’s financial activities, operations, and investor relations.
Kyle obtained a Bachelor of Science degree from Texas State University – San Marcos, where he also played Division 1 Baseball.