Add These 2 Tips To Your Alternative Investment Tips For 2014

With gold set to close at its lowest level since 2000 and the stock market's volatility causing ongoing concern for international investors, 2014 will certainly be the year that the investment community rethinks their traditional investing strategies and reconsiders their position on investing in alternatives. Although for years many investors have been apprehensive about including nontraditional holdings in their investment portfolio, the uncertainty and under-performance of traditional investments that characterized much of 2013, will be a strong motivator for the investment community in 2014.

Tip 1: Look For Alternatives to Gold Investments

Perhaps one of the most challenging things for many investors to accept is that gold is not likely to return to its days of glory, when values rose to $1800+ in 2011. The current economic conditions, although tumultuous, are not synonymous with the right environment for gold to skyrocket; and will not be for the foreseeable future. Instead of gambling on economic woes, investors would be wise to review their investing alternatives and consider the advantages of investing in shipping containers and other hard assets, that have delivered strong performances and great returns for investors; in 2013. Albeit gold is likely to remain a small part most investment portfolios, its role will diminish along with its appeal, as investors seek other alternatives to the precious metal.

Tip 2: Look For Alternatives to Stock Investments

The trouble with the stock market anywhere is that it is heavily influenced by political, corporate and economic conditions, which for the most part, investors are helpless to control. Whether it be political remarks that start a war or corporate comments that spark a scandal, the investment community is at the mercy of politicians and corporate officers. After the industry's indiscretions were exposed post-2008, investors are demanding transparency and more control over their investment decisions. This is leading most investment-seekers away from equities and toward investing alternatives.

There are those who believe that the stock market in the United States is in need of a correction. Many say that leading stocks are overvalued and that prices need to fall, much like gold has, to a figure that is more inline with what is practical. Regrettably there are going to be unfortunate investors who will be unprepared and suffer unexpected losses, when the correct values are realized. On the other hand there will be members of the investment community who had foreseen the impending doom and eliminated the unnecessary risk, by reducing their stock holdings and replacing them with alternative investments that invest in global trade and profit from economic growth.

Many Alternative Investments Are Supported by Investor Reviews

Traditional investments that once were the pillars of an investor's portfolio, are systematically being replaced with alternative investment offerings that have proven they can perform much better, under the pressures of the global economy. The grip that stocks and bonds once held on the investment community is coming undone and investors are apprehensively venturing into new areas of investing, commonly referred to as alternative investments.

Many of these alternatives were once secret investments held by affluent investors and influential investment firms, until the Global Financial Crisis created a need for these alternative investments to be liquidated to cover losses sustained in traditional assets. Since their introduction into the mainstream market, alternatives have been rising in popularity and demand, as the investment community increasingly recognizes the value in including offerings like shipping container investments from Pacific Tycoon; to create a well balanced portfolio.

After suffering significant losses in traditional markets during the last half a decade, investors are no longer relying solely on the advice of their financial advisers and stock brokers. Instead, many are conducting their own research and reading through pages and pages of information, to ensure they make an education and confident investment decision. In most cases, investment-seekers can gain valuable insight about alternative offerings from perusing investors' investment reviews, and then effectively using that first-hand investing experience and information to decide whether or not to invest.

The investment community is home to volumes of valuable information that can lead investors in the right direction, as they part ways with traditional investments and embark on a journey to discover their investing alternatives.

Investors Seek Opportunities That Invest in Economic Growth

With steady economic growth being experienced around the world, the financially devastating events of 2008 are beginning to wane in investors' minds. Although for the most part the confidence of the investment community has return to pre-GFC levels, investors have changed their investment strategies so as to more closely align themselves with industries and sectors that consistently profit from investing in economic growth. One such industry at the forefront, is the global shipping container industry.

The economies of the world are stimulated by trade. Established container lines have been profiting from this for decades. The import and export of consumer goods, predominately through the use of cargo containers, fuels the growth of regional businesses, supports growing populations and improves GDP. Thus, as the need for consumer goods increases and officials establish higher economic goals, the demand for shipping containers and shipping services can be expected to mirror the growth. This creates opportunities for both shipping companies and investors, to profit from the continuing economic prosperity.

Although growth in some well-established nations in Europe and North America is not as favorable as the emerging markets in Asia and South America, the shipping industry deploys their maritime assets, like shipping containers; in the regions that are demonstrating the need. As demand rises in other areas of the world, it becomes increasingly important to invest in shipping containers, as well as shipping vessels; to accommodate growth in economies everywhere. The fact of the matter is, a rise in economic growth is a rise in revenues for shipping companies and container owners.

This is What Advisers Look For in Alternative Investments

Alternative investments, a relatively new asset class for investors to consider, has been steadily growing in demand since 2008. Essentially, alternative investments are asset classes that do not correlate with traditional assets such as stocks, bonds and real estate. They typically follow their own cycles and as a result, introducing alternative asset classes could potentially help volatility in investment holdings by reducing the overall exposure to risks, especially when traditional asset classes are performing poorly. Subsequently, investment advisers and wealth managers have been paying much closer attention to this asset class, particularly as their investor clients become increasingly apprehensive about traditional investment offerings; in a sluggish global economy.

Moreover, a recent (2013) analysis conducted by Franklin Square Capital Partners revealed that advisers prefer alternative-investment providers with a high level of integrity and transparency, with 92% ranking that factor as one of the top three most important criteria considered, when selecting a provider. In addition, more than 90% also said strong, consistent performance that offered steady investment returns was another essential characteristic. Another essential factor advisers look for in the alternative asset class is competitive pricing, and a product's correlation to other asset classes. Additionally, the survey revealed thirty-eight percent of the advisers said that they would choose a provider based on the liquidity of the product. These factors advisers consider when investing into alternatives are typically characteristics that investors are seeking due to the volatility and tough conditions of the financial markets.

Historically, the most profitable alternative investments have been an investment secret of high-net worth and institutional investors, but nowadays they are far more available to an eager international investment community. Alternative investments range from private equity to hedge funds to commodities to antiques and can complement a variety of investing strategies. The most important aspect to recognize, is that alternative investments are designed to complement a well-founded portfolio, rather than to serve as the focal point.

Alternative Investment Allocations And Opportunities Increase

Although the stock market dropped 55 per cent at the beginning of the global financial crisis, there were some investors who benefited from their heavy investments in alternatives, which (as we know now) fared much better than stocks and bonds. It would seem that the traditional 60/40 model failed or under-performed in 2008. In fact, the studies that followed showed that allotting 20 to 30 per cent of a portfolio to alternative investments, resulted in both a higher return and a better standard deviation. It is important to note however, that the suggestion of a 20 per cent maximum for the allocation of alternatives in a portfolio is not a hard-and-fast maximum, but rather a widely recognized guideline. Allotting more or less, is at the discretion of the individual investor.

According to a new report by the research firm Cerulli Associates, advisers are increasingly recommending alternative strategies to their clients, including retail clients, with 25 per cent reporting that they have plans to increase their allocations to alternative offerings. The fact of the matter is that there is a lot of benefits to alternative investments, including: relatively high degree of transparency, liquidity, and the costs are much lower. These advantages make it possible for almost anyone, with even a small amount of capital, to invest in alternatives.

"In 2009, we had $500 million in alternative mutual fund assets ... Today, it's $1.5 billion, and that's just adviser-directed. So that's a three-fold increase, and it doesn't include alternative allocations within firm-based models, which have also grown."- Co-Head of Alternative Investments at Raymond James.

The demand for alternative investments at the retail and mass-affluent client level has produced an explosion in new alternative offerings; as well as a wider range of investments within those opportunities. Morningstar, in its latest report on alternative funds (2013), notes that an estimated $19.7 billion moved into alternative assets over the past year alone, with much of that money reportedly coming out of equities. To give an indication of the rising popularity of alternative investments, only 4 per cent of advisers said they do not use alternatives in portfolios, down substantially from the 17 per cent who answered that question back in 2008 (Barron's and Morningstar 2013).

Pension Funds Shoveling Money Into Alternative Investments

Pension funds have steadily been increasing their allocation of capital to alternative investments, largely because of the asset class' ability beat rising inflation and incur less risk than traditional investments. According to a recent report by Cliffwater LLC, an adviser to institutional investors, between 2006 to 2012, State pension funds more than doubled their allocations to alternative investments, like private equity, real estate, hedge funds, hard assets and commodities. Accumulating almost $600 billion in assets, these nontraditional investments now comprise 24 percent of public pension fund holdings. Where did the capital come from? It would seem that the funds dropped their investments in stocks to 49 percent from 61 percent, over the last six-years.

The International Monetary Fund (IMF) released a report in late 2013 that suggested that over the course of the last 10 years, the average U.S. public pension fund earned a return of 6.4 percent a year. Although regarded as very healthy by some, it is clearly not enough to meet the 8 percent return that is guaranteed to government employees. In an effort to take pressure off the State budgets that must cover the repeated losses, the IMF revealed that many State pension funds have been moving billions of dollars to alternative investments, that are promising to deliver much higher yields with much less risk.

It has become increasingly evident that in the uncertain global economy, alternative assets have become more appealing (than traditional assets) to both pension fund managers and institutional advisers. Although there is no guarantee that every alternative asset will consistently outperform traditional assets, for now State pension funds have good reason to support a move toward investing in alternative investments.

Many Alternative Investments Have Proven They Build Wealth

For most investors, their primary objective is to get a return on investment with the least amount of risk and stress involved. Over the last ten years, the repeated uncertainty in economic markets has led to lower returns across many asset classes. Traditional equity investments, such as bank deposits and bonds, have fallen to record lows, prompting investors to use alternative investing strategies like crowd-fund investing, commodities, private equity, collectibles, etc.; to build their portfolio and personal wealth.

Alternative investments such as crowd-fund investing can be a significant source of liquidity for small cap investments. In places like Australia and many parts of Europe, including Austria, Germany, the Netherlands, Switzerland and the United Kingdom, crowd-fund investing has been incredibly successful. The models applied to this investment strategy range from equity to quasi-equity and subordinated loans, sometimes accompanied by the addition of equity. In most instances, these types of investments provide an ongoing cash incentive to investors, while also providing a longer term potential. Not to be forgotten, there are many other forms of alternative investments, such as hard assets; that have proven to deliver consistently better returns in today's uncertain economy. Among the many benefits of hard assets, these investments have an intrinsic value and (in most instances) offer investors a low-risk investment, with long-term capital growth.

Despite the higher than normal volatility, especially for shares exposed to growth markets, there are alternative investments that are producing steady returns for investors; quarter after quarter. Moreover, for investors with an income requirement, who are content to allow market cycles to pass but prefer lower volatility, income producing assets are one of the best available options; particularly in today's risky global markets. Time and again, these alternative investments have proven that they can provide investors with less risk and more returns over the long-run.

Affluent Investors Use Alternatives to Guard Against Risk

Although equity markets may have hit all-time highs, the investment community has not forgotten the meltdown in 2008 that resulted in a stunning 40 percent loss, and as such many are asking their money mangers and investment advisers to help protect their wealth against another fallout. In response, fund managers are shifting their client's assets away from the "bubble-prone" stock market and into alternative assets, like real estate, commodities and shipping container investments; that have repeatedly demonstrated that they can accommodate for stock and bond market risks.

"Alternative products are attracting interest from retail and institutional investors, as both are increasingly looking for portfolio diversification, enhanced returns and risk management,"- Associate Director at Cerulli Associates.

In fact, a research study by Strategic Insight reported that the most important reason for the recent move away from stocks by affluent asset managers, has been the need to "diversify their investment holdings; so as to protect their clients' assets." Moreover, the study also concluded that the amount of money invested in alternative (or nontraditional) investments, particularly those offerings that have little or no correlation to the stock or bond market, will rise considerably over the next five years.

"Alternative funds have more than doubled since 2008 and could do so again in the next five years,"- The Strategic Insight Report.

The study by Strategic Insight also forecast that the use of alternative assets will go from 2 per cent of total mutual fund assets to 14 per cent over the next decade, with the amounts in alternative mutual fund assets likely growing from approximately $245 billion currently, to $490 billion in 2018.

Whether the immediate state of investment anxiety is the result of the recent U.S. government shutdown and/or the historically low interest rates, investors are choosing to keep large amounts of cash as well as alternative assets. In doing so, investors can avoid the uncertainty of the world's stock and bond markets and stay ahead of rising inflation.

Alternatives To Consider With Interest Rates At Record Lows

With interest rates at record lows, stocks and bonds are finding it extremely difficult to become stable and produce healthy returns with minimal risk for the investor. As a result, investors have shifted their focus to alternatives, which essentially consist of anything but the traditional investment vehicles such as stocks, bonds and cash. There are plenty of alternatives for investment-seekers to invest their money in, assuming they take the time to learn about investments and thoroughly research the risks associated with each option, to determine which opportunities are a worthwhile investment.

With that being said, when interest rates are at record lows and the investment community is faced with tumultuous markets and economic uncertainty, investments in foreign exchange, hard assets, exchange traded funds (ETFs), as well as options and futures, can present profitable opportunities for investors to capitalize on. Here is how:

Foreign Exchange: Trading foreign exchange will allow you to profit when you speculate on the value of one currency compared to another. Many Forex traders trade on margin, where their funds only cover a percentage of a trade’s total value and they essentially borrow the rest from their Forex providers. This method can be extremely profitable if executed correctly and investors understand the concept and can decipher economics movements.

Hard Assets: These alternatives include commodities such as oil, gold, silver, natural gas or any other investment with intrinsic value. These alternatives provide minimal risk to the invest in times of economic uncertainty and thus represent a popular trend in modern investing. In addition, hard assets like shipping container investments, are excellent courses of inflation hedge, again representing a need in today's global economy.

Exchange Traded Funds (ETFs): These alternative investment offerings are a lot like managed funds, and as such, very often hold a combination of traditional investment assets like stocks, commodities and/or bonds. This common investing strategy generally aims to replicate returns of an index, or another underlying asset, at a much lower cost. In addition to this, Exchange Traded Funds are traded like shares on the major global markets, thus they are widely regarded as much easier to invest in and easier to liquidate, than actual managed fund investments.

Options and Futures: These types of investments are alternative ways of trading assets like shares, currencies, indices and commodities. Options and futures allow an investor to buy or sell the share on a specific date in the future, at a specific price. This essentially means that instead of buying a share now and holding it for say, a year, you can a premium for the right to buy it at a certain price anytime. Nevertheless, the risk is that investors are betting that the price will rise.

With increasing risks associated with investments and uncertainty looming over the global economy, it is paramount that today's savvy investors carefully consider all of their investing alternatives before making their final investment decision. As mentioned above, Forex, ETFs, hard assets, options and futures can provide dependable ways to overcome investing challenges in difficult markets, and have proven they can deliver steady investment returns if investors do the proper research and carefully consider the amount of risk they can bear.

Alternatives Expected to Comprise 14% of Mutual Fund Assets

Asset managers around the world, who handle both institutional and retail accounts, have been increasingly focused on alternative assets. In fact, it was recently reported (Cerulli Associates) that between 8 and 10 life insurers said that they were actively considering increasing their allocation of assets toward alternative strategies, as they look for dependable sources of additional yield. Moreover, in the October 2013 report from Cerulli Associates, the data suggested that alternative mutual funds can be expected to comprise approximately 14 percent of all mutual fund assets, in the coming decade.

Since the financial crisis of 2008, institutions and advisers have been under immense pressure to increase returns while keeping exposure to risk unchanged or at least held at a minimum. As a result of this increasing pressure, many have shifted their focus the alternative assets that have been steadily attracting interest from retail and institutional investors seeking portfolio diversification, enhanced returns and (of course) manageable risk. In addition, the report's extensive research reveals that more than 50 percent of surveyed asset managers suggested that alternative investments are either more important than other initiatives or the most important initiative, both within the retail and institutional environment. Moreover, 60 per cent of managers have said the same ingredients will be followed for the portfolios of their high net worth clients, as well.

Most of the international investment community has taken notice of the fact that alternative investments have been growing in popularity exponentially over the course of the last couple of years. As a result of the increase in demand, the value of many alternative assets has been increasing steadily as well. Investors have noticed this too, especially when alternatives are compared to the S&P 500. This is especially appealing to investment-seekers, as they look for opportunities that will protect their investment principle and beat rising inflation, as well as address the skyrocketing cost of living.

What Are The Types of Investment Risk When Investing?

People with less disposable income tend to be, by necessity, more risk averse. On the other hand, day traders feel as though if they are not making trade after trade everyday, there is a problem. In most instances, these high-volume traders are motivated by the belief that more risk can equate to more profits. Albeit true in some instances, it is wise for investors to completely understand that investing involves risk and that there are different types of risk that can adversely affect their investment return. With that being said, here are 8 risk factors to consider, before pursuing an investment opportunity of any kind.

Foreign-Exchange Risk: When investing in foreign countries you must consider the fact that currency exchange rates can change the value of the asset as well.

Credit or Default Risk: This is the risk that a company or individual will not be able to pay the interest or principal on its debt obligations. This type of risk is very concerning for investors who hold bonds in their portfolios.

Systematic Risk: A significant political event, for example, could affect several of the assets in your portfolio.

Unsystematic Risk: An example is news that would affect a specific stock, like a sudden strike by employees.

Country Risk: This is the risk that a country will not be able to honor its financial commitments. This can also harm the performance of other investments in countries the default country has relations with.

Political Risk: This represents the financial risk that a country’s government will suddenly face if it changes its policies.

Interest Rate Risk: This is the risk that an investment’s value will change as a result of a rise/drop in interest rates. This risk affects the value of bonds more so than stocks.

Market Risk: This is the most familiar of all risks. Also referred to as volatility, market risk is the day-to-day fluctuation in stock market prices.

An aggressive investor, or one with a high risk tolerance, is someone who is willing to risk losing money; to potentially earn a better return. A conservative investor, or one with a low risk tolerance, often prefers investments that are more likely to maintain the original investment value. It is important for you to identify what kind of investor you are and determine how much exposure to risk you are comfortable with, before investing. This approach will increase your odds of choosing the investment offerings that can deliver long-term investing success and profits with less associated risk.