Money expert urges investors to consider non-traditional asset classes
An investment expert has called for more consumers to consider non-traditional asset classes, as rising rates make it harder to save and stock market volatility continues.
Nigel Green, the chief executive of deVere Group, says that now is the time for investors to consider diversifying into less traditional asset classes.
He noted that the three major indexes on Wall Street are experiencing their worst stretch of losses in decades, and this is being echoed globally.
“It comes amid investors’ concerns over inflation, which is forcing central banks to slam the breaks on their economies, the ongoing war in Ukraine, Covid lockdowns in China’s manufacturing heartlands known as the ‘factory of the world’, and some household name companies posting weak results,” Green added.
“This backdrop is creating a yield-starved environment for investors.”
Read more: FCA speeds up removal of firms’ permissions to protect consumers
Earlier this month, UK inflation reached a 40-year high of 9.1 per cent, and Bank of England governor Andrew Bailey has warned that inflation will tip even higher, increasing the risk of a new recession.
This has left many investors wondering how to protect their money from interest rate risk and the eroding effect of inflation.
“For those looking for both capital appreciation and capital preservation, now is the time to consider diversifying into less traditional, return-enhancing asset classes,” said Green.
“These could include venture capital, structured products, cryptocurrencies, high dividend stock, hedge funds, managed futures, and direct real estate, amongst others.
“Such investments could also be useful tools to improve the risk-return characteristics of your investment portfolio. This is because they increase diversification and reduce volatility, due to their low correlations to more traditional investments such as stocks and bonds; and they can hedge some portfolio exposures.”
While Green did not specifically mention peer-to-peer lending as an alternative to cash savings or equity holdings, P2P lenders have been positioning themselves as a viable option. Dozens of P2P platforms are still open to retail investors, and most of these allow lenders to keep their investments in an Innovative Finance ISA (IFISA) tax wrapper to maximise returns.
According to exclusive research from Peer2Peer Finance News, IFISAs consistently returned between seven and nine per cent per annum, on average, between 2018 and 222.
Meanwhile, last month the average return for an easy access Cash ISA was just 0.38 per cent, according to the latest Moneyfacts statistics.
“Yield-starved investors should explore less traditional opportunities, not only for potentially higher returns, but also as they provide diversification and downside protection for their portfolios,” Green added.
Read more: IFISAs: The golden ticket