The interest rates on bonds (also known as bond yields) have been rising, making the asset class unattractive to many investors since, consequently, bond prices change inversely to rates. And recently, CNBC reported that “cash is back as an asset” because of rising bond yields.
While that might be a good suggestion for some investors, high-net-worth investors could potentially miss out on high-return opportunities if they follow that advice.
Don’t get us wrong, it’s great to hold some cash, but you want to make your money work for you as much as possible.
And indeed, the stock market may scare some people right now with its high volatility—down 700 points one day and up 400 the next—even though the savvy investor can find opportunities here as well.
So where can investors turn right now when traditional U.S. markets don’t seem like a good option?
Top Alternatives to Bonds
As of this writing, and based on current trends, we think the following investments could be attractive if you’re looking to move out of bonds. In addition, some of these asset classes don’t directly correlate to traditional equity and fixed asset investments. That means if U.S. bonds continue to decline, these investments may not, thus potentially shielding your portfolio from deeper losses.
- Emerging Markets—These include a wide range of investments from countries that are in a high-growth phase with rapidly expanding and improving market environments. These are considered higher-risk but also high-return investments.
- Natural Resources—There’s good market optimism right now in natural resources as this sector appears to begin its rebound. It’s a good time to evaluate the investment landscape here for potential opportunities.
- Private Equity—Investing in private companies can potentially bring a high return if you find a good investment. Just remember that it can be difficult to liquidate these investments quickly if needed.
- Real Estate—The U.S. real estate market is still in good shape with interest rates still relatively low and property values still rising in parts of the country. Finding the right opportunity is key here, and like Private Equity, it can be slow to liquidate depending on the investment.
Before you jump from bonds to any these suggestions, or cash, or something else, we highly recommend that you contact a wealth management advisor who can help you choose the right investment strategy—and the best specific investments—that fit your situation and your personal tolerance for risk.
If you don’t have an advisor, or if you just have questions, we can help. Click here to contact us today.