Why Alternative Investments Are Critical in a Market Downturn

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Given the current environment we live in, I want to unpack why alternative investments are a game-changer. 
Quite frankly, many Australians are relatively complacent about the current economic situation, and many are saying that Australia has dodged a bullet. There seems to be a fair amount of optimism in our economic reporting. 
For example, various media outlets favour the idea that we’re on the road to recovery and that our unemployment rate hasn’t quite risen to the same levels as in other countries. 
However, if you broaden the economic reporting context and consider what is happening globally, the first noticeable point is that the reporting is significantly more gloomy than ours. 
From that perspective, I believe there are two impacts we need to consider:
  • how the COVID virus is managed over the coming months (and even years) by governments; and 
  • how governments and world leaders respond to creating economic stimulus and managing debt.
While it could be the case that some countries will recover better than others, in my experience, the worst is yet to come. This is especially true for many business owners concerned about the economic impact of COVID rather than the health cost. 
So, positioning yourself from a wealth and finance perspective is significantly more important than ever, regardless of how successful or resilient you think your business may be. If you’re not focused on your wealth management and increasing your investment portfolio’s stability, you’re going to struggle in the coming years. 
I want to outline why I believe alternative investments are a game-changer because, regardless of what happens economically, there is a subsection of investments that will have much higher immunity to the volatility of the current market. 

Why Alternative Investments Can Withstand Economic Turbulence

The primary reasons why alternative investments don’t have that exposure to volatility is that they sit in a particular subsection of the market where there isn’t much reliance on organic capital growth but instead on the relatively high cash flow. 

In other words, these investments don’t require a rising market and don’t significantly appreciate over time. 

But instead, they are investments with high rental demand by a large percentage of the population, so they generally generate a relatively high cash flow. 

The idea behind utilising this alternative investment strategy is that, regardless of what the economy looks like, people still need somewhere to live. 

So, suppose you can tap into that sector of the market (i.e. relatively affordable housing). In that case, you’re likely to be in the position where you can survive the volatility of the market. 

How To De-Risk Your Portfolio With Alternative Property

Another way you are protected from the market’s volatility is that you don’t need to invest vast amounts of money into these assets.

The benefit of that is you have a significantly larger capacity to diversify:

  • geographically;
  • across different deals;
  • across different strategies;
  • with different deal makers;
  • with different returns; and
  • with varying points of liquidity. 

So, as an investor, you’re planting more seeds and giving yourself a better chance to “de-risk” your overall portfolio. 

Another benefit of smaller deals is that you won’t necessarily have to rely on the banks to loan you money. This means fewer costs associated with lending and the ability to make faster decisions with investment opportunities because you don’t have to deal with any red tape to get access to capital.

Generating Cash Flow More Quickly  

If you look at the sorts of returns you get in the alternative space, in contrast with what you get in traditional property, investors are generating five times more cash flow in many cases.

While it may be harder to get the same returns in alternative investment when the traditional market is performing well, if the demand isn’t rising and there’s uncertainty or volatility, you need alternative investment to leverage exponentially higher returns.

In those instances, your focus will be on the cash flow to catapult your investing returns.

If you can take a small percentage of your portfolio, and times the cash by five, it makes a significant impact on fast-tracking your journey to financial freedom and your capacity to weather any future storms in the rest of your portfolio.

The Value of Having a Network of Trusted Advisors

It’s the classic adage: your network is your net worth. 

If you build a network of trusted advisors and dealmakers who have access to premium alternative investment deals, you never have to go chasing after deals again.

The time spent on finding deals and trying to outbid somebody else is a significant friction point for many investors. 

As a result, investing gets thrown on the back burner because they simply can’t muster up the time, energy and enthusiasm to go chasing deals.

What’s fantastic about the alternative investment space is that it’s a closed and private network of individuals. If you can tap into that network, those individuals can become your partners and take on chasing deals for you – something that many of our members enjoy in the Freedom Warrior program.

Key Takeaways

Why I’m so passionate about alternative investment right now is that:

  • the lack of exposure to volatility delivers significant cash flow;
  • deal sizes are small;
  • banks are eliminated from the equation; and
  • once you’ve established your network, you don’t have to waste time.

If speed to goal matters to you, then my suggestion is that you absolutely have to look at the alternative investing space.

Beyond that, with the economic turbulence we’re experiencing, it’s vital that you’re thinking about how you’re positioned and if you’re going to fare well if the turbulence lasts another decade.

If you’re looking to get into the alternative investing space, then be sure to get in touch with me to find out what alternative strategies might be fit for you.

Alternatively, you can access my recent live training which unpacks this article in detail.

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