With the prospect of spending two decades or more in retirement, many baby boomers and retirees are worried about making their savings last, particularly with so-called “safe investments” like bonds giving investors dismal returns.
Some may seek to work longer or downsize their homes and their lifestyles. Others may try less-conventional strategies like longevity insurance, which is like an annuity that pays out a guaranteed income once the policy holder turns 80 or 85.
For financial adviser James Shagawat of Baron Financial Group, two of his preferred alternative investments are real estate and natural resource commodities, like oil and gas and timber.
“They don’t act the way the market does,” he told “Nightly Business Report.”
“So let’s say the market is on a tear; these might not be. But if the market corrects, this might help.”
However, Shagawat said it’s important to invest wisely and “diversify across many asset classes.”
When it comes to adding real estate as an investment, he said, mutual funds are the way to go.
“This is geographically diversified and not single-family homes where you think of real estate,” he said. “These are storage facilities and assisted living, and not just concentrated on one part of the country but across the country.”
Shagawat also prefers mutual funds or exchange-traded funds when investing in a natural resource commodity like timber.
He admits these are volatile investments, and therefore cautions investors to make these so-called alternative investments only a small part of their portfolio.
A good mix he uses for clients is 25 percent alternative investments, 25 percent in international investments, 25 percent in domestic stocks and 25 percent in standard fixed income.
To invest internationally, Shagawat likes using mutual funds and “very diversified, low-cost” exchange-traded funds.
“We`ve been using more of those. It’s been working and helping portfolios grow, which is the goal,” he said.
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