Alternative investments have emerged as a compelling option for diversification and return enhancement beyond the traditional 60/40 portfolio — 60% equities and 40% bonds. Between inflation protection, diversification and the potential to make more money, investors are increasingly eager for exposure to investment opportunities beyond traditional assets.
While alternatives have long been a key part of investment strategies used by high-net-worth individuals, the same can’t be said for regular investors. These may be unconventional investments and, for many, investments shrouded by mystery and misconceptions. But clarity on the reality of alternative investments, their accessibility, risks and the diverse opportunities they present can open the door to new investment opportunities to potentially help you build and protect your wealth.
Let’s look at three myths about alternative investments and what’s true.
Reality: Indeed, access to many types of alternative investments has historically been reserved for high-net-worth individuals. Investment opportunities in venture capital, private credit and blue-chip artworks have typically been available only to those who can invest significant amounts of capital. But the landscape is evolving. Investment platforms, funds and new products now provide more access, allowing a broader range of investors to add alternatives to their portfolios.
SoFi’s launch of alternative investments allows regular investors to explore assets such as venture capital, private credit and private real estate through accessible funds.
While traditional venture capital funds can require a minimum investment ranging from several hundred thousand to several million dollars, SoFi breaks the mold with an investment minimum as low as $500. This means alternative assets are no longer reserved exclusively for the wealthy.
Reality: The alternative investments market continues to grow and is expected to balloon even further in the coming years. “Alternative asset classes – in particular, real assets, private equity and private debt – will more than double in size, reaching $21.1 trillion by 2025, accounting for 15% of global AuM,” according to a PwC report.
Fortunately, access to these assets is growing too. While investing platforms in recent years have offered regular investors greater access to alternative investments, you no longer need a handful of different fledgling apps to invest in private real estate, venture capital or private credit to get the diverse asset exposure you desire.
SoFi, an all-in-one personal finance company, offers a solution to this scattered approach to investing. Through a single, user-friendly platform, SoFi customers can build a portfolio of traditional assets like stocks, ETFs, mutual funds and money market funds, and alternative assets like private credit and venture capital.
Reality: Like all investments, alternative assets such as hedge funds, private equity or real estate carry unique risks. While alternative investments typically carry more risk than traditional investments like stocks and bonds, proper due diligence and strategic allocation across different assets can help mitigate risks and potentially enhance a portfolio’s overall risk-adjusted return.
Alternative investments are risky. But adding additional sources of risk and return to your portfolio could potentially help smooth returns over time.
With investment products like SoFi Alt, customers can get access to alternative investment funds run by experienced asset managers who have done the research and due diligence. But you should still review each fund to make sure its objectives align with your risk tolerance and investing strategy. Assess your unique goals and risk tolerance to see if alternative investments have a place in your portfolio.
With SoFi Alternative Investments, SoFi offers a simplified way for regular investors to access once-exclusive investment opportunities, giving them more control over how and where they invest their money. Whether you’re after uncorrelated returns compared to traditional investments, the potential for higher income compared to traditional fixed-income markets or opportunities to invest in private companies and assets with significant growth potential, you can navigate the investment landscape with SoFi.
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