Establishing a safe stream of investment income has been a significant challenge for investors and the challenge seems to be expanding.
The Wall Street Journal today reports “There is now $13 trillion of global negative-yielding debt, according to Bank of America Merrill Lynch. That compares with $11 trillion before the
Brexit vote, and barely none with a negative yield in mid-2014.”
In other words, a sharply growing portion of investors are accepting no return on their investment and are paying for a reputable entity to keep their money safe.
My response is to consider the possibility of alternative investments in the portfolio. The term “alternative investment” has become associates with private placement and crowdfunded debt and equity investments. These are typically a small but higher yielding portion of the portfolio that help to offset lower rates of returns on other classes of assets. Alternative investments are also associated with higher levels of risk so skilled analysis and diversification are important.
I am not aware of any simple measure of demand for alternative investments at the retail investor level but it is reasonable to expect that demand is growing. I suspect that this will lead to further increase in risk for investors as new unproven issuers and platforms rise to meet this increased demand. We can best respond with the same cautious appraisal of each offering on a case-by-case basis.