An increasing number of investors are growing concerned about the performance of the traditional investments in their portfolio; in particular, their stocks and bonds. Their foremost concerns are that stocks are overvalued and bonds are risky These are two very unappealing scenarios for cautious investors.
In recent years, countless investing surveys have been conducted. Of the people who responded, nearly half believed that the stock market is overvalued. According to the analysts, the current market is the second longest Bull Market of all time. Historically, the S&P 500’s mean P/E ratio is approximately 15. At the moment, it is in the mid-twenties.
Some financial advisers are of the belief that the markets are overdue for a pullback. With that being said, many believe it will emerge as a correction within the existing Bull market, and not surprise the world with another global financial crisis. Many are saying that they expect to see a 5% to 10% pullback in the stock market.
Interest rates and bond prices enjoy an inverse relationship. As interest rates rise, the price of bonds is likely to fall. Conversely, when interest rates fall, the price of bonds trading in the marketplace generally rises. Also, if the cost of living and inflation increase dramatically, and at a faster rate than income investment, investors will see their purchasing power erode and may actually see a negative rate of return.
Aside from interest rate risk, which is the most widely-known of risks in the bond market, reinvestment, default, and liquidity risk should also be closely considered when choosing whether or not to pursue a bond investment.
In recent years, alternative investments have found an important place in a well-balanced investment portfolio. The investment community has taken the opportunity to invest in containers and other hard assets, that emerged relatively unscathed from the last financial crisis. In the absence of viable options from traditional investments, investment-seekers are finding alternative investments to be much more appealing.