Volatility in the stock market is terrifying right now.
In the past week, we’ve seen the Dow whipsaw by 1,000 points or more every day.
Your natural reaction might be to bury your head in the sand and try to ignore it.
But as you’ll learn today, if you take one simple step, not only can you protect your portfolio — but you can even grow it substantially.
It all comes down to a little bit of knowledge…
And one tiny tweak.
The Power of Non-Correlated Assets
To kick things off, let me explain the benefits of investing in what’s called non-correlated assets.
Non-correlated assets are investments that zig when the stock market zags.
With non-correlated assets in your portfolio, even if the stock market plummets, your overall portfolio can weather the storm. It could even soar.
To see how this works in the real world, let me share some fascinating research from the CFA Institute.
The Benefits of Private Equity in a “Volatile” Environment
The CFA Institute is a global association of investment professionals.
Mainly, it aims to improve investment outcomes for investors like you.
The Institute has done an enormous amount of research on how various investments perform during financial crises.
For example, in a study called “Private Equity Throughout the Financial Crisis,” it looked at how private equity (“PE”) investments like startups performed during the financial crisis of 2007/2008.
Here are a few of its findings:
- There are distinct benefits to investing in PE, “particularly in an adverse and volatile investment environment.”
- Relative to the stock market, “Private equity returns are favorable, persistent, and risk reducing.”
- Throughout the financial crisis, PE substantially outperformed the stock market. In fact, it achieved “consistently superior returns.”
On top of all this, this report uncovered another important benefit of investing in private equity during a market downturn…
Not only did it hand investors higher returns, but it also offered less volatility!
And less volatility means less anxiety for investors like you...
26 Years of Uninterrupted Profits
You see, PE investments have managed to deliver steady, uninterrupted profits for nearly 30 years.
As the CFA Institute reported, since 1994, annual PE returns haven’t been negative once. That compares to four down years for the S&P 500.
As you can see in the below chart from FactorResearch, PE is nearly 50% less volatile than the S&P 500… and it’s even less volatile than the 10-year U.S. bond!
Which is why the CFA Institute said that “private equity’s appeal is obvious.”
Based on its high returns and low volatility, PE is now the most popular “alternative” asset class for institutional investors, according to the Preqin’s 2019 Investor Outlook for Alternative Assets.
These professionals are allocating roughly 10% of their portfolio to PE.
But here’s the thing:
To get the benefits of this asset class, you don’t need to allocate nearly that much…
Protect Yourself — And Multiply Your Returns Many Times Over
Perhaps surprisingly, just a few hundred dollars here and there could turn into a seven-figure nest egg.
The “secret” here is simple: Historically, early-stage private investing has been the single-most profitable long-term asset class.
On average, for the past 20 years, through good times and bad, these investments have returned roughly 55% per year. And at 55% per year, in just 20 years, you could turn a $250 investment into more than $1.6 million.
So even if you took just a tiny piece of your portfolio and put it into the private markets, you could multiply your total returns many times over.
Which is why, if you’re looking to remove volatility from your portfolio — and earn market-beating returns — the time to get started in the private markets is now.
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