5 benefits of investing in alternative assets
Alternative assets have been gaining traction in recent years due to their appeal to investors seeking diversification and non-traditional sources of return. In this blog post, we’ll explore the different types of alternative assets and their potential benefits, as well as how to start adding them to your existing portfolio.
What Are Alternative Assets?
“Alternative” is a term broadly used to describe assets outside the “norm”; that is, assets beyond traditional investments such as public equities (stocks), bonds, mutual funds, and cash. Alternative assets can be found in both the public and private markets, often in sectors considered to be inefficient. These include:
- Fine art
- Hedge funds
- Natural resources, including precious metals
- Real estate
- Venture capital
- Whisky and wine
The Benefits of Alternative Assets
Alternative assets are prized by sophisticated investors because they behave differently than standard equity and bond investments. As such, they offer a unique set of benefits:
1. Broad diversification
One of the primary tenets of modern investing, diversification involves spreading your investments across multiple classes so your exposure to any one type of asset is limited. Alternative assets can be an important part of this strategy, since investors have a broad range of strategies and sectors to choose from. Perhaps more importantly, alternatives as a whole typically show a low correlation to the performance of more traditional asset classes. While diversification doesn’t guarantee profit or totally guard a portfolio against losses, it’s designed to help reduce volatility over time.
2. Lower volatility
For investors who want to build their portfolios on less volatile assets, alternatives are a smart move. As mentioned, alternative markets bear little to no correlation with mainstream securities markets.The value of many of these assets – art, wine, and real estate location, for instance – fluctuates minimally from day to day. Also, there are fewer buyers and sellers, and purchase sizes tend to be larger, with more complex transactions. This creates more friction, which gives the alternative market less liquidity in the short term.
3. Inflation hedge and equity appreciation
To successfully hedge against inflation, a portfolio is structured so its rate of return outpaces the inflation rate. Alternative assets tend to perform well in this area, particularly those that are real (tangible items with intrinsic value, like collectibles or precious metals). Although their prices in the short term can be hard to predict, real assets are generally expected to appreciate over time. In addition, you own real assets outright, making them an excellent means to both build equity and stay ahead of detrimental market forces.
4. Passive income
Who doesn’t like the thought of a consistent, long-term stream of income that doesn’t require adding a second career? Alternative assets can be a great addition to an income investing portfolio, which, if done correctly, can generate enough cash flow to free up investors’ time to focus on other areas of their lives. Additionally, passive income can provide a cushion against salary cuts and job loss, as well as supplement a household on a fixed income.
5. Higher overall return potential
Many investors turn to alternative assets to improve the risk/return profile of a portfolio. While these assets often require a higher investment and involve higher risk, they can potentially
yield returns greater than the S&P 500, depending on the investment type, horizon, and economic factors at play. Alternative asset classes have attracted sophisticated investors for one reason above all others: they offer a historically better return on investment than other options available to retail investors.
Add Franchise Investing to Your Portfolio with FranShares
For decades, most alternative assets have been out of reach for the average person, accessible only to high-net-worth individuals or institutional investors. FranShares is working to change that in our favorite little corner of the world… the franchising sector.
We’re bringing passive franchise investing to more investors using a unique fractionalized approach that allows people from all walks of life to own part of pre-vetted managed franchises with great return potential. Plus, our deep industry knowledge paired with no fees means that we help investors get maximum returns safely – so no one loses their shirt. Our mission is to help investors reap the benefits of franchise investing with a business model that offers:
- Passive income
Our best-in-class franchise management team ensures that our investors enjoy truly passive income through quarterly distributions without having to manage the franchise. In other words, we do the legwork while you enjoy the returns.
- Flexible capital commitment
We offer investors the opportunity to invest for as little as $500, although our model also appeals to ultra-high-net-worth investors. Our platform allows people of all income levels to become fractional franchise owners with the ability to invest the right amount of capital for their own personal circumstances.
- High-yield diversification
Franchises are real assets with little or no correlation to the overall stock market; thus, they act as a hedge against inflation and are not subject to the same level of volatility.
Furthermore, our fractionalized ownership approach allows investors to fully diversify their franchise holdings. Owning a portfolio of franchises across different geographies and industries creates an effective buffer against challenges that may shut down a single franchise or location, such as service franchises closing temporarily during pandemic lockdowns.
- Low risk
To minimize volatility and give our investors peace of mind, FranShares only invests in recession-resistant franchises with a track record of success. We perform all due diligence and thoroughly vet each franchise partner for strong brand recognition and market positioning.
The franchise industry is regulated by the Federal Trade Commission (FTC); and as a registered investment vehicle, FranShares is also regulated by the Securities and Exchange Commission (SEC). The FTC requires full disclosure of each franchisee’s background, financials, and performance. In addition, we provide our investors with reporting and regulatory compliance documentation above and beyond what those regulators require.
Get Started With FranShares
If you’re an investor looking to incorporate franchises into your portfolio, investing fractionally with FranShares offers high earning potential and diversification in a completely passive investment model.
To learn more about the FranShares opportunity, sign up for our waitlist on the FranShares home page.