During the current “yield-starved environment”, deVere Group founder and CEO Nigel Green has encouraged investors to consider less traditional, return-enhancing asset classes.
“The three major equity indexes on Wall Street are experiencing their worst stretch of losses in decades, and this is being echoed globally,” said Mr Green.
“It comes amid investors’ concerns over inflation, which is forcing central banks to slam the brakes on their economies, the ongoing war in Ukraine, COVID lockdowns in China’s manufacturing heartlands known as the ‘factory of the world’, and some household name companies posting weak results.”
The limited returns offered by equities at present means that those seeking both capital appreciation and capital preservation may need to look elsewhere, according to Mr Green.
He suggested investors could consider a number of other asset classes including venture capital, structured products, cryptocurrencies, high dividend stock, hedge funds, managed futures and direct real estate.
“Such investments could also be useful tools to improve the risk-return characteristics of your investment portfolio,” added Mr Green.
“This is because they increase diversification and reduce volatility, due to their low correlations to more traditional investments such as stocks and bonds, and they can hedge some portfolio exposures.”
Due to the often complex nature of these types of investments, he noted that investors would likely need to work with a fund manager in order to receive ‘returning-boosting results’.
But investors should not completely abandon traditional markets, Mr Green said, “because financial history teaches us that stock markets go up over time”.
“Yield-starved investors should explore less traditional opportunities, not only for potentially higher returns, but also as they provide diversification and downside protection for their portfolios.”
The S&P 500 is down more than 17 per cent from its highs reached in January, while locally the S&P/ASX 200 has fallen by more than 5 per cent.
However, AMP Capital chief economist Shane Oliver expects that a grizzly bear market will be avoided in both the US and Australia with “reasonable returns” for shares over the next year.
