Risk Management & Portfolio Diversification with Alternative Investing

For high net worth individuals looking to increase their wealth through investing, it can be challenging to know where to find quality deals. On top of that, once you gain access to a solid investment opportunity, how do you keep the deals coming? While many people are comfortable handing off their financial decisions to advisors, other investors are more involved in the management of their own wealth and portfolios, which can begin to feel like a full-time job if you lack access to the right communities. Understanding where to find investment opportunities, assessing the risk they present, and managing a diverse portfolio is a crucial step in achieving the financial freedom you need to live your life as you’ve always envisioned it.  

Identifying Deal Flow and Investment Opportunities 

The term ‘deal flow’ gets tossed around quite a bit in the investment sphere, but what does it actually mean? What is a deal and how does it differ from other business ventures? Does the flow constitute a deal moving from one phase to the next or a constant supply of opportunities for investors? 

Simply put, deal flow is the number of investment opportunities available to a company or an investor at a certain time in a certain market. The definition of a deal is subject to change depending on the context of the industry. However, for the sake of high net worth individuals, this usually refers to either traditional investment opportunities or alternative investment opportunities like real estate, commodities, and hedge funds. The flow refers to the number of opportunities in front of an investor as well as the movement of those opportunities. You could have a dozen amazing deals on your plate, but if the negotiations move slowly or an investment is put on pause, you’ll gain plenty of headaches and very little value as an investor. So, how do you know which investment opportunities are worth your while? 

Alternative Investing

So, you’ve developed a clear savings strategy, maybe you’ve made some sound investments on your own, and you’ve grown your wealth organically, but you’d like to take it to the next level. 

One common limiting factor that accredited investors face is the amount of money they’re able to commit to different endeavors. While possessing funds in the range of two to 20 million dollars (high net worth) might seem like a lot to outsiders, the reality of the situation is that many investment opportunities have a hefty price tag attached, pushing out some prospective investors. 

To get out of this bind, many people have turned to exclusive investing pools. 

For newer investors who are looking to gain access to financial opportunities, but might not have as much experience when it comes to identifying risky investments, join a group of likeminded investors can be incredibly valuable. As part of a private club, high net worth individuals are able to pool their investment dollars together and attract bigger, better deals with the safety and security of a more seasoned community. 

How to Find the Best Deals 

Whether you’re involved in one of these groups or not, finding the right opportunity is a matter of education, research, and trust. You wouldn’t buy a new car without shopping around for a while, checking out the competitors, test driving different models, and asking friends or family for their input. Investment opportunities are the same. Additionally, not every deal will be right for your portfolio, but that doesn’t mean it’s a bad deal. For example, a minivan might be the best choice for a family with lots of kids and more on the way while a Jeep with the doors taken off might be the perfect fit for an off-road enthusiast. 

To get the most out of any deal, you need to have ample knowledge of your current investment portfolio posture and a clear idea of the projected direction of your financial future. This will help you determine what level of risk you’re willing to take on with various deal flows and how to manage the opportunities in front of you. In the financial world, securing your future through investing is just as much about what you know as it is about who you know, which is where joining a like-minded community can be instrumental. 

Diversifying Your Portfolio

In traditional investing, the stock exchange is the main marketplace where investors are able to find new opportunities to grow their money. However, in today’s world, there is a diverse range of ways to grow your wealth. Plenty of investors shy away from alternative opportunities because there’s an incorrect assumption that ‘alternative’ means more risk, but that couldn’t be further from the truth. There are some very distinct benefits of alternative investments, particularly real estate, the most notable of which is the fact that they can react far less to general market volatility.  A single downturn in the stock market could plummet someone’s financial future, but alternative markets tend to have a more stable reaction, in part, because you can have more control over your assets. With a carefully balanced portfolio that combines both types of investments, you can get the best of both worlds and spread your risk more strategically. 

The bottom line is that alternative investments are able to offer a wide range of benefits to high net worth individuals. From gaining access to more long-term investments to diversifying your portfolio and balancing out your risk, you can work toward a more secure financial future that’s designed to your specifications. To learn more about growing and maintaining your wealth for generations to come, check out Mile Marker Club’s digital library of wealth education.

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