Alternative Investments

How to Balance Traditional and Alternative Assets – Quiz!

Alice Wilson October 28, 2024

Between 2018 and 2020, U.S. alternative assets grew 42% in total assets under management, as more investors add alternatives to their portfolios. But finding the right blend of traditional stocks, bonds, and alternatives isn’t always straightforward.

Let’s explore how a diversified approach can help balance risk and reward.

Why Balance Traditional and Alternative Assets?

Traditional assets like stocks and bonds can offer you stability and long-term growth, while alternatives like real estate, private equity, and SBF notes can bring higher return potential and unique risks.

Mixing them can lower overall risk and amplify growth.

 

Dollar bills floating around a bar chart, for "How to Balance Traditional and Alternative Assets - Quiz!"
Both traditional and alternative assets are useful for different reasons, but knowing how to mix them can be difficult

 

Consider Alex, a 40-something investor with years of retirement savings built up. A few years ago, they decided to diversify their portfolio to a more balanced mix: around half in stocks, a portion in bonds, and the remainder in alternatives like real estate investments and precious metals.

When a market downturn occurred, Alex’s diversified strategy helped cushion the impact—while stocks took a hit, their overall portfolio saw only a moderate dip, thanks to the steady performance of bonds and gains from their alternative assets.

 

Finding the Right Asset Mix

Starting with a 70/30 rule—70% in traditional assets and 30% in alternatives—can give you stability with room for growth.

As you become more experienced, you might adjust to a 60/40 split.

Ultimately, your ideal mix depends on your risk tolerance, liquidity needs, and financial goals. Tailor your portfolio to fit your unique investing style.

 

What can I do now?

Want to learn more about how to balance alternative and traditional assets in your own portfolio?

Take our Interactive Quiz.

 

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