Inflation is affecting businesses and individuals worldwide and it’s not going anywhere anytime soon. The pandemic has forced factories in parts of Asia to shut down, along with trucking and staffing shortages at ports is slowing the U.S. port facility operations. Due to this, inflation has become part of daily conversations causing investors to consider alternative investments outside of the stock market. A historical number of container ships are anchored off the coasts of LA, Long Beach and Long Island, resulting in a shortage of goods reaching their final destinations.
“Despite the shortage, wages rose by 0.6% in September, making the year-over-year increase 4.6%,” said David Freisner, Wealth Management Advisor at Konza Global Advisors. “Conversely, core prices (excluding food & energy) hit a three-decade high in October and when combined with double-digit increases in food and energy categories, wage gains have fallen behind inflation increases.”
The strong demand combined with supply chain bottlenecks is projected to keep inflation running possibly higher through the middle of 2022 or longer. During times of high volatility, it is important to carefully consider other investment ventures that are more stable through challenging market times. Alternative investments, or investing outside the stock market, may provide a positive solution.
What is Alternative Investing?
“Less than 10% of wealth lies within the U.S. Stock Market, leaving 90% unaccounted for by most investors — this is where alternative investment opportunities come into play,” said Freisner. Alternative investing is the practice of seeking opportunities outside of the traditional stock market, including investment in real estate, private equity or commodities. In turn, alternative investing reduces exposure to volatility and creates the potential for a higher return than a traditional investment of stocks and bonds. Click here to watch David Freisner discuss alternative investing in detail.
Consider Adding an Alternative Investment to Your Portfolio
“Since 1996, the number of firms listed on the U.S. Stock Exchanges has declined by greater than 50%. The number of public companies you can invest in is less than half where it was 25 years ago,” said Freisner. This is an important consideration when you reflect on your wealth and future opportunities.
Are you willing to trust your hard-earned financial resources to an advisor that only participates in this shrinking space? Think about that for building your wealth. The number of U.S. firms you can invest in is less than half where it was 25 years ago.
So where can you go to uncover the other 90% where most of the wealth opportunities can be found? Alternative investments. Our focus for our clients at Konza Global is on locating solid alternative investment opportunities so clients are not simply riding the emotional roller coaster of up and down market cycles. These investments can reduce volatility within your portfolio while also providing solid growth. What wealth-building opportunities are you missing out on if your advisor does not have the expertise and depth of professional relationships to uncover the other 90% available? You owe it to yourself to partner with an advisor that possesses the knowledge and relationships to identify specific opportunities in alternative investments based on your goals and risk profile.
We certainly have the expertise and experience to identify stock market opportunities in traditional investments, and we excel in this area for our clients. But accumulating and protecting wealth goes much deeper than this. That is why you should contact us to review your individual portfolio and goals.
We understand you may be overwhelmed by the investment opportunities in today’s economic environment. Diversifying your investment portfolio is critical to reducing investment risk. Wondering where to begin? FT Adviser suggests starting with listed infrastructure and renewable assets due to their straightforward business models that generate stable cash flows, creating dependable dividends. Once a client advances past the basics, then they can dive deeper into more complex investments such as hedge funds, private equity or leveraged credit.
Common Alternative Investments
- Private Equity
- Real Estate
- Private Credit
- Infrastructure
- Emerging Markets
- Finance Receivables
- Land
- Forestry
- Farmland
- Commodities
- Artwork
- Innovative Industries
- Artificial Intelligence & Robotics
- Other Alternative Investments
Alternative Investment Opportunity: Wireless Infrastructure
Wireless infrastructure carries the digital traffic of our daily communication and applications to support everything from emails, text messaging, streaming services, the cloud and more. As a society, we have come to expect fast and reliable connectivity on a daily basis. With this demand, mobile traffic has increased by 600% during the prior five-year period.
5G networks promise supercharged speeds along with the ability to handle applications simultaneously. The challenge and investment opportunity lies within the fact that 5G signals do not travel as far as 4G signals, requiring more cell towers, fiber networks, easements and distributed antenna systems to handle the increased demand. As an alternative investment opportunity, this one is wildly attractive due to its niche and necessity.
Here are just a few infrastructure investment opportunities the increased demand will bring:
- Cell towers
- Fiber networksEasements
- Distributed antenna systems
Alternative Investment Opportunity: Private Equity
Private equity is made up of nine investment strategies. At its core, private equity is capital that is invested in private companies that are not listed on the major U.S. Stock Exchanges such as New York Stock Exchange or NASDAQ.
In its infancy, private equity was generally a hands-off investment focused solely on returns for private equity firms. Over the past four decades, private equity has developed for the better. Today, private equity firms are more focused on aligning the interests of all stakeholders.
Investors can access private equity in four ways:
- PE firms listed on stock markets
- Private company startups through friends and family groups
- Private placement offerings that are specific for certain sectors and asset classes
- Exchange-traded funds, known as ETFs
While there are more than 30 million businesses in the United States, only 1 in 10,000 are publicly traded. The opportunities for creating wealth within the private sector investments are almost unlimited.
Alternative Investment Opportunity: Private Real Estate
In 2020, the U.S. property management industry reached an unprecedented revenue of 88.4 billion dollars, according to Statista. Although investing in property may sound obvious, many people don’t know what types of properties are available or which are considered worthwhile investments.
Private Real Estate is an alternative asset class comprised of pooled investments in real estate markets and includes the acquisition, financing and ownership of properties. It is concentrated in the commercial sector and allows for diversification into various types of real estate, including:
- Multi-family apartments
- Industrial office buildings
- Retail
- Self-storage
- Hospitality
As an opportunity for investors to diversify from the stock markets and reduce volatility while building their wealth, private real estate may be an alternative investment to consider adding to your portfolio.
Alternative Investment Opportunity: Private Credit
According to Stacker, 99.9% of U.S. companies are small businesses. The U.S. economy not only relies on small businesses for our retail and service needs but also for investing opportunities.
Since the financial crisis in 2008, banks and other traditional lenders have moved away from loans to small businesses they consider riskier. In addition to the decline of publicly traded companies, many firms have reverted to private status or have chosen to remain private.
Private credit is non-bank lending where the debt is not issued or traded on the public markets. Private credit is also referred to as direct lending, private lending or alternative lending.
Investing in private credit offers advantages for investors, including:
- Higher yields than traditional investments.
- Exposure to diverse industries and risk-return profiles.
- Size – the private credit market has surpassed $1 trillion.
- More lucrative to lenders and investors than bigger companies that are considered safer investments.
Alternative Investment Opportunity: Farmland
In Kansas alone, there are over 46 million acres of farmland, accounting for 87% of all Kansas land, according to the Kansas Department of Agriculture. Farmland and crops have proven throughout history to be stable investments due to the consistent demand.
Here are just a few potential benefits to investing in farmland:
- Potential for above-average return on investment.
- Lower volatility compared to other asset classes.
- Low correlation as farmland generally doesn’t move in the same direction as the stock market.
- Inflationary hedge due to the commodities farmland produces, such as corn, wheat and grain.
Turn to the Experts at Konza Global
The possibilities for investing outside of the stock market and NASDAQ are essentially endless. Follow along with our YouTube channel or other social media accounts for more alternative investing opportunities.
For more information on alternative investing, please get in touch with a Konza Global Advisor.
Important Note
This material is provided for educational purposes only and does not constitute investment advice. The information contained herein is based on current tax laws, which may change in the future. Konza Global Advisors cannot be held responsible for any direct or incidental loss resulting from applying any of the information provided in this publication or from any other source mentioned. The information provided in these materials does not constitute any legal, tax or accounting advice. Please consult with a qualified professional for this type of advice. The information provided above is obtained from publicly available sources and is reliable. However, no representation or warranty is made as to its accuracy or completeness.