Investing is a dangerous but lucrative long-game. Investors and advisors are not only hedging their bets against current shifts in markets around the globe, they are also trying to build wealth for a future where their dollars may not go as far. Inflation eats into profits in a way that most beginning investors don’t consider, and leaves experts sometimes scratching their heads on what to do next. Building a solid portfolio is not just about risk management, it’s also about making them resilient against the threat of inflation. Many financial experts are turning toward alternative investments to create a more inflation resistant portfolio. Let’s explore how these opportunities can help advisors and investors in their financial endeavors.
Exploring ESG Investing
More and more investors are looking for stable opportunities and consistent growth. With the rise of the green economy and a bigger focus on environmental concerns in multiple sectors, environmental, social, and governance focused strategies are becoming a smart move for advisors and investors. ESG investing is creating new ways to build more resilient portfolios.
With the right ESG strategy, savvy investors look for growth options within areas like climate change, green energy, and social stability. By investing in companies and projects focused in these areas, they are shoring up not only their funds for today, but trying to hedge against future inflation. ESG companies are often innovative and forward-thinking, and it’s in this space that investments can truly grow over time.
Look Toward the Secondary Market for Private Shares
Another option to explore as you make your portfolio more inflation-resistant, is a secondary market for private shares. It’s here that investors and advisors can access shares from companies that are growing without needing to wait for an IPO. Instead of pouring more into volatile public equities, these secondary markets allow investors to take advantage of sellers who want more liquidity and are offloading some of their shares.
One advantage to these markets is that new technology allows buyers to retain anonymity until the purchase is made. This allows them to negotiate pricing and get live quotes all without revealing their identity until they actually make the trade. Sellers can use these marketplaces to find out what their shares are even worth and they too can stay anonymous until the final trade is complete.
For investors, this is a great opportunity to buy into companies that are growing quickly, when other seed investors and employees are looking for ways to turn their shares into hard money. Because many of these companies are tech focused or biotech, they are positioned for high growth potential even when inflation may hit in future years.
Fill Your Portfolio With Real Assets
When you’re living in an era of digital investing, company shares, and even cryptocurrency, the idea of buying tangible assets can feel outdated. However, when it comes to inflation, having something of physical value can be just what you need to still grow your wealth and the wealth of your clients when inflation hits. Things like real estate, infrastructure, and even farmland are known for their ability to help protect investment portfolios from the rising costs of inflation.
Expert investors know that these assets have a real value and they usually will appreciate alongside the increased prices of goods and services. For real estate investors, for example, can often raise rents in properties where costs of living are increasing. This means that their properties have the potential to earn them more money in the future. For landowners, leases to farms can command higher prices as they use the property to grow food and raise animals.
Rethink Old-School Diversification Models
Every investor and financial advisor knows that diversification is the name of the game when you want to build wealth. But when it comes to building wealth that can overcome inflation, it’s crucial to use modern methods and tools that work in today’s environment. It’s important to approach your diversification efforts with creativity, wisdom, and a willingness to step out on new limbs.
From ESG investing that builds wealth in forward thinking environmental and social initiatives to exploring secondary markets to access private shares, you can easily build an investment stack that can overcome the rising costs of inflation. It’s not just about having a 60/40 portfolio anymore. There is far more nuance with today’s investment opportunities that allow asset managers, investors, and curious wealth builders to think ahead, and earn more while they are doing it.
