DBEH - The Case For Alternative Assets

2024-01-30 22:55:26 ET

Summary

• The common refrain is that whatever millionaires do, we all should do it. A recent study showed that millionaires invest little in alternatives, leading many to believe they are unneeded.
• Alternative investments have a bad reputation but can provide uncorrelated sources of return and improve portfolio statistics.
• Style premia, a strategy that captures alpha from long and short positions across factors and asset classes, has shown to outperform traditional portfolios and reduce risk.

The Evidence for Alternative Investments

The common refrain from many financial advisors is that alternative investments are unnecessary. For example, I recently read an article by Nick Maggiulli from Ritholtz Wealth Management, about how millionaires invest. In the article, he puts forth data from Vanguard showing that investors in this category of wealth generally have the majority of their money in stocks, bonds, and cash. Mr. Maggiulli states in his post on X advertising the blog post:

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