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Investors say real estate, crypto and art are the future of finance – here’s why they’re right
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There is growing interest in alternative investments like real estate, crypto, and art, even though a third of Americans say they I’ve never heard the term alternative investment.
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Indeed, the new What do Americans think about alternative investments in 2024? A survey by Alto, a self-directed IRA platform, found that only 20% of Americans are aware of alternative investing.
Like Eric Satz, founder and CEO of Alto, explained, while interest in alternatives has been growing for years among institutional investors and the ultra-high net worth, we are now seeing a shift that now includes retail investors.
“More investors than ever can now access quality investments outside of traditional investment vehicles, and you can do it with your retirement funds in a tax-advantaged account,” he said.
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The rise of the 40/30/30 portfolio
According to Satz, despite the “incredible performance” of public markets over the past four months, market dynamics have accelerated the shift to a 40/30/30 portfolio approach, with significant interest in private credit markets, from real estate and crypto.
A 40/30/30 portfolio approach includes 40% public equities, 30% fixed income and 30% alternative investments, in today’s environment, “where alternatives no longer live behind walled gardens” , according to Wealth Management.
“Americans are looking for alternative ways to invest, which often relate to what they are most interested in or understand best, and alternative asset opportunities often fall into these categories,” Satz said .
Changes in the crypto landscape
The survey found that crypto was one of the most popular alternative investments. One driver, Satz says, is the recent approval of spot Bitcoin exchange-traded funds (ETFs), which have sparked an incredible surge of interest in the investment industry.
“At a time when the 40/30/30 portfolio method is still being defined, Americans are exploring new ways to diversify their portfolios,” he added.
And when it comes to Bitcoin and Ethereum specifically, Staz said that if your macro-level thesis is that the future of money and money movement lies on blockchain, then you think there’s a significant upside potential in these investments.
“We’ve seen extreme volatility and dramatic rises and falls in prices, but Americans remain undeterred. When you think about the historical barriers that have prevented most investors from accessing outsized return opportunities, it makes perfect sense that Americans remain excited about the future promise of crypto,” Satz added.
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Accessibility through real estate
Real estate is the other alternative investment attracting the most interest, according to the survey.
“A major factor that cannot be ignored is regulatory in nature: real estate and cryptocurrencies are accessible to all investors, regardless of their accreditation status,” Satz said.
Additionally, he noted that investors tend to gravitate toward investments that excite or interest them as well as their knowledge or expertise in the field.
“From a returns perspective, real estate is attractive to many investors because it can be leveraged – it allows the use of debt or a mortgage – and therefore often offers a risk profile /attractive reward,” he added.
Art as a hedge
As for interest in art investments, it lags behind interest in crypto and real estate, according to the survey. Yet, as Satz said, art offers the potential for uncorrelated returns, meaning its value moves independently of the stock market.
“Thus, art acts as a hedge against economic downturns, thereby reducing overall portfolio risk,” he said.
Another factor is that, despite its increasing value, collectible art has also historically been out of reach for most investors, but this is changing with technology and the fractional ownership scenarios it enables on a large scale, a he declared.
“Overall, I think the appeal of investing in art comes from the fact that investors want to invest in what they love. You may not be able to see it on your wall, but you can reap the benefits from an investment point of view,” he added.
Major barriers to access
Lack of education and familiarity with alternatives are the biggest barriers to investing in alternatives, according to Satz.
“Most investors simply don’t know how or where to start. Alternatives have also historically been reserved for high net worth individuals, but that is no longer the case and that is why we are democratizing access to alternatives by allowing investors to use their retirement funds to invest in these asset classes “, did he declare. .
Optimism in this type of investment is showing: 44% of investors have confidence in the stock market for their retirement income while 39% expect alternative assets to outperform the market over the next five years, according to the investigation.
“The truth is in the data and alternative assets have been proven to outperform public markets over medium to long term periods, so why not be optimistic? Satz said.
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This article was originally published on GOBankingRates.com: Investors say real estate, crypto and art are the future of finance – here’s why they’re right