Alternative Investment Charts

There are all SORTS of alternative investments out there…

  • From hedge funds to bitcoin… what’s your Poison?
  • Want to buy volatility or weather patterns?
  • BAM! Alternatives are here…
  • Alternatives are supposed to be a tactical investment, to complement your core holdings such as $SPY
  • Purpose is to “smooth out” performance and risk-adjusted return, but that doesn’t seem to be the case very often…
  • Especially once you add in the fees
  • DO YOUR RESEARCH! And don’t invest in what you don’t understand
  • I repeat: Do NOT invest in what you don’t understand
  • While many alternative investments are non-traded,
  • Below are charts from traded alternative investments such as liquid alts, high yield, currencies, and REITs
  • Some of the more interesting alternative investments are coming from established hedge funds… taking strategies that work in the regular mutual fund format, such as managed futures, and packaging them for retail investors who don’t want to the pay the crazy fees of a hedge fund, want liquidity, etc.
  • Check out $ABYAX from Abbey Capital… it’s a multi-manager managed futures (global macro) fund that I currently invest in

Featured Chart

  • $QAI is a very popular alternative investment etf
  • Just me, but I like my alternatives to be very focused so I know exactly how they fit into my portfolio
  • And in the case of alternatives, I don’t think there IS a one-size-fits-all solution
  • That’s why I don’t invest in $QAI
  • And, honestly… look at that chart!
  • Doesn’t seem to have “smoothed” out performance or risk at all…

Real Estate

  • Technically, REIT’s are not alternative investments because they are already included in the S&P $SPY
  • But many look at real estate as a safe haven, especially yield-starved retirees
  • I like REITs, but consider the equity in my home as my REIT investment
  • That said, $VNQ is a GREAT choice for the DRIP investor
  • It’s SUPER diversified and actually IS a one-stop shop for your REIT exposure
  • Low fees, love it…
  • Many yield hunters are looking at mortgage reits… massive yield, massive volatility, lots of risk
  • $MORL is a popular choice, but might be better suited to traders rather than investors…
  • By far, the most popular REIT right now is $O Realty Income Corp… in the last 5 years it has gone from $30/share to $70/share… not bad!
  • But remember, when everyone else is going in, we should be wary and really dig into the research… who cares about a 3.5% yield if you lose 25% of your money?

Currencies

  • I don’t invest in currencies directly
  • Why? Easy: because I don’t understand them
  • Currencies are an alternative investment by any book: in fact, they’re a completely different type of asset
  • Currencies are a way to invest directly in a country and its geopolitics
  • Currencies are the way Central Banks fight each other… that, and interest rates
  • Even though I don’t invest directly in currencies, I keep up on them and follow the news because
  • I DO have indirect currency exposure via my global mining company investments and managed futures $ABYAX
  • Brexit, anyone?

High Yield

  • High yield isn’t about chasing yield…
  • Your yield should be considered as a reward for prudent investing
  • Higher yield = higher risk, typically
  • Your job is to find high yield, but with lower risk
  • To that end, I suggest you check out and follow BDCs
  • Trend trading BDC’s can allow an investor to reduce cost basis, increase yield, reduce risk, and take some profits along the way
  • My suggestion: NEVER go all-in on high yield… stuff just changes too quickly
  • Best to drip invest… and take advantage of the lows
  • High yield investing is emotional… “be prepared”
  • Just check out $PSEC and you’ll see what I mean…
  • One strategy with high-yield investments is to look for insider buying… they must know something

Liquid Alts

  • Liquid alts options are growing daily!
  • Be wary: most of them totally suck
  • But I like alternatives…
  • As I mentioned above, check out managed futures if you don’t want to handle the futures yourself
  • Merger arbitrage, market neutral, long/short, lots of hedge fund strategies work as liquid investments
  • However… generally you should consider FUNDS over etfs in this space…
  • Better management options, active trading, but higher fees…
  • I think worth the fees for active, PROACTIVE management
  • That said,
  • I invest in $CEFL for my closed-end fund exposure
  • I invest in $LMLP for my private equity exposure
  • And when I lose 10%, I just drip $500 more in…
  • Paychecks in the mail every month are nice… but don’t forget to pay taxes, lol~!