Alternative investments were once closely guarded secrets of the rich, and institutional investors, like foundations and endowments. Fortunately, those days are behind us.
Over the past several years, many progressive investment managers have fought to break down some of these barriers and make alternative investments accessible to retail investors. As a result, the alternative investment industry has experienced explosive growth.
The term "alternative investments" refers to a wide range of investments, from hedge funds to private equities, real estate investment trusts (REITs), managed futures, insurance, venture capital, oil and gas programs and commodities. These asset classes can usually only be bought based on a contractual subscription. They are usually not listed on any exchange.
Stocks represent ownership interests in companies. The value of that ownership stake increases and decreases over the long-term in accordance with the success of that company's underlying business. Companies pay their shareholders through dividends. When picking stocks you should consider the industry, the company's position within that industry, its management, products, financial strength and prospects as well as any material events which might effect any of these items.
Bonds are essentially loans made by investors to governments, municipalities or corporations. When you buy a bond, you become a lender. As long as the borrower remains solvent, your principal is repaid along with interest, known as the coupon. Bonds held until maturing normally pay the full face amount. However, if they are sold prior to maturity, their value may be higher or lower than the face value. Investors should consider interest rate and credit risks when determining whether to invest in bonds, and they should also consider the tax implications.
When it comes to retirement, most people fail to plan. Whether it is their retirement age, account value, or portfolio yield, investors often get caught up chasing numbers.
At Cabot Lodge, while we believe that "numbers" are important, we also believe that goals have meaning that numbers cannot convey. We see our mission as helping clients achieve their goals.
Our retirement planning services begin with getting to know you. We learn about your dreams, and about what is important to you and your family. We also gain an appreciation for your priorities and what you hope that your money will accomplish.
A REIT is an entity which allows many investors to pool their capital to invest in a professionally managed, large-scale, diversified portfolio of real estate of the caliber and size generally not available to smaller investors who neither have the capital nor skill to invest in such assets on their own.
In order to remain qualified as a REIT, a REIT must pay annual distibutions to its investors of at least 90% of its annual REIT taxable income, and can therefore avoid the "double taxation" that usually applies to income earned by a regular corporation.
In allocating a part of your portfolio to real estate, you should want to minimize the exposure of some of your assets to the volatility of other investments or securities. Non traded REITs, which are publicly registered but not exchange-traded do not experience the volatility of the broader stock market, and generally are intended to only reflect the value of the underlying real estate assets. However, the lack of public trading for non-traded REIT shares create limited liquidity, and, because they are not traded on a securities exchange, are not subject to market valuation.
With more than 10,000 mutual funds now available, and most working Americans contributing to them via their employer-sponsored plans, mutual funds are no longer the mystery they once were. Instead, they're the mainstay of many family's investment portfolios.
At its most basic, a mutual fund is a financial intermediary that manages a pool of money from investors who share the same investment objectives. By pooling their money together, the investors can purchase stocks, bonds, cash, and other assets as far lower trading costs than they could on their own.