Investing is a popular way to grow and preserve wealth, but it is not without risk. For years, decades even, the 60/40 portfolio has been the asset allocation of choice for those Investing for retirement. But with the global economy, market changes and a low interest rate environment, those Investing for income should allocate some of their assets to alternative investments. In this article, we explore the pros and cons of Investing, the assets that stick to the script, and the ownership rates of financial investments among households.
First, let's look at the assets that stuck to the script. In a poor year for equity returns, defensive stocks—companies with relatively low volatility—held up better than the broad market. These stocks included utilities, real estate investment trusts (REITs), consumer staples and health care. These assets, which usually have higher dividend yields, are often the foundation of a portfolio and can help smooth out volatility and protect against drawdowns.
However, ownership rates of financial investments are significantly lower for Black and Hispanic households than for white households, even after controlling for income and other factors. This means that many minority households are missing out on the wealth-building opportunities of Investing. To address this gap, financial institutions have implemented programs that focus on increasing access to financial services for low- and moderate-income communities.
(NASDAQ:TPG), through its TPG NEXT fund, the firm's strategy dedicated to Investing in diverse alternative asset managers, and GCM Grosvenor Elevate, a joint venture between the firm and GCM Grosvenor, recently announced a strategic investment in Diffractive, a black-owned private equity firm focused on impact real asset Investing. The investment is a testament to TPG's commitment to increasing access to capital for minority-owned businesses.
Macquarie Asset Management also recently announced a significant investment in a data center business. The company said the investment is a testament to the strength and scalability of its data center business.
Money market funds are another asset class that has been popular in recent years. Money market funds are low-risk, short-term investments that are typically used to store cash or to make short-term investments. However, investors should understand the share price of a money market fund can dip below its net asset value of $1 and have historically done so.
Finally, sustainable land use investments have been gaining popularity in recent years as investors look for ways to invest for both financial and environmental returns. Diffractive recently announced an investment in a sustainable land use leader, which is a testament to the company's commitment to impact Investing.
In conclusion, Investing can be a great way to grow and preserve wealth, but it is not without risk. investors should consider their risk tolerance, goals and financial situation before Investing, and they should understand the risk associated with each asset class. Furthermore, investors should be aware of the ownership rates of financial investments among households and consider Investing in businesses that are owned by minority households.
