Why Alternative Investments Are Not Just for the Wealthy
We hear a lot these days about alternative investments.
Wall Street firms regularly tout their expertise in these investments and try to convince us we need them in our portfolio.
In the beginning, alternative investments were only available to what most would consider the wealthy.
The SEC set the definition of the wealthy with their accredited investor definition.
One thing common in the early days of these investments was high fees. In the beginning,
managers charged investors 2% of the amount invested plus 20% of profits. Here’s what that means:
The High Cost of Fees
If someone invested $100,000 in a fund, and the fund earned 10% (few do), the total dollars paid by the investor would be $4,000.
Instead of a 10% return, you earned 6%! That’s a 40% drop in your profit!
That means instead of making $10,000 on your $100,000 investment, you walked away with $6,000!
They introduced lower cost, more liquid alternative investments into the marketplace, and lowered the bar for investing.
Over the years, investors became wise to the scheme, as did other investment product producers.
three for accredited investors, three for everyone else.
Today, we’re going to introduce you to six investments you may not have considered-
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