Simply put, any investment outside stocks, bonds, or cash is considered an alternative. Most alternatives are not publicly traded on an exchange; instead investments are made on private markets.
The most common alternative investments include:
Previously only accessible to institutions, private market alternatives are rapidly becoming a meaningful part of many individual investor portfolios. Alternatives can compliment a traditional portfolio, potentially delivering stronger risk-adjusted returns.
While each alternative investment is unique, the following characteristics generally apply across private markets.
Portfolio diversification previously meant holding a selection of stocks and bonds. Now investors have access to a broader universe of returns than ever before.
Alternative investments tend to move more independently of public stocks and bonds. This means that if public markets fall, your private market investments are less likely to be impacted.
Private market investments have historically outperformed public stocks and bonds. This is primarily due to the following:
Private markets tend to be significantly less volatile than public stocks and bonds. This is due, in part, to the non-publicly traded nature of these investments, making them less impacted by day-to-day market noise.
Private markets have historically outperformed public stocks in every major downturn of the past 15 years.9
Private market investments offer various forms of returns that match a range of goals:
While each portfolio is unique, top investment managers like KKR recommend allocating up to 30% of your portfolio to private market alternatives.
9. As of 1/26/2023. The chart represents the largest quarterly drawdowns in the S&P 500 since 1/1/2008. “Private markets” represents an equally weighted (33.3%) blended index across Private Real Estate, Private Equity and Private Credit. Private Real Estate consists of the NCREIF Property Index (33.3%), Private Equity consists of the Preqin Private Equity index (33.3%), and Private Credit consists of the Preqin Private Debt Index (16.65%) and Cliffwater Direct Lending Index (16.65%). Past performance is not indicative of future results. It is not possible to invest directly in an index of private market assets. Unless otherwise noted, financial indices assume reinvestment of dividends. All indices are unmanaged.
Diversification does not ensure a profit or protect against a loss in a declining market.
Yieldstreet provides access to alternative investments previously reserved only for institutions and the ultra-wealthy. Our mission is to help millions of people generate $3 billion of income outside the traditional public markets by 2025. We are committed to making financial products more inclusive by creating a modern investment portfolio.