South Florida Sun-Sentinel (Sunday)
Investment Options
Everyone needs to decide how to invest their money. Many seek to maximize return and minimize risk. Most investors are familiar with stocks and bonds or at least stock and bond funds. However just because you are familiar with something doesn’t mean that you shouldn’t explore some alternative investments.
Although stocks have done relatively well over long periods of time (think 20 or more years) there have been many decades where stocks have either not made much or even lost money. If you are counting exclusively on stocks to provide a comfortable retirement, you may want to explore some other options as well.
For instance, private real estate funds not only provide tax favored income, but they have historically outperformed the stock market with less volatility. For those who don’t want to own real estate, private mortgages, which are secured by real estate, have attractive yields which often exceed 8%. Private credit funds are also currently yielding over 8% with floating rate loans that don’t have the same interest rate risk as traditional bonds. For those who want less risk on their investments, buffered ETF’s allow investors to obtain 10-15% downside protection. With a 15% buffer if the S&P 500 is down 16% in a year, investors only lose 1% (16% minus the 15% buffer). The tradeoff is that in the years the stock market appreciates, gains are typically capped in the range of 15-17%. This approach can often beat the stock market in below-average time periods but might underperform when the stock market is in a bull market. Nevertheless, the strategy offers investors more predictable returns.
Finally, for those who want complete protection of principal, insurance companies, aided by rising interest rates, have been offering their most attractive terms in years on index annuities. The most compelling index annuities protect against all market losses in the down years but allow investors to potentially earn over 9% in the good years. For those who like a part of their portfolio free from investment risk, these can be a great option.