Less Than A Week From Election Day, We Could All Use A Little Optimism

If there’s anything that everyone can agree on, it’s that the tone out there these days is divisive, if not wholly negative. And we could all use a little optimism as well as a few reminders. 

That’s The Juice’s goal: To find recall the bright side, because one always tends to exist. And to help make you better with money — to help you be a better investor — as a means to that end. 

When you take control of your personal finance and investment portfolio, it’s  easier to cut through the noise, dark rhetoric and disinformation and get to that bright side. 

To help you do this, The Juice is focusing heavily on alternative investments through the end of the year. What are they? Who is buying them? How can you buy them? And how you can use them to enhance your investment returns. 

Because cashing in on (or sitting on profits in) the Magnificent Seven is only the beginning of modern-day investing. We think you can be a better, more diversified investor by allocating some of your capital to alternative investments. 

On Monday (see today’s Freshly Squeezed section for the link), we told you that young, wealthy investors are buying alternative investments. 

Via a big Bank of America study of wealthy Americans, we found that younger investors favor alternatives over traditional investments such as stocks. For the older crowd (44+), it’s just the opposite. They favor stocks and rank alternatives (with real estate a big exception) much lower:

This isn’t to say you should blindly follow younger wealthy people just because they’re young (or wealthy). However, it is to say that The Juice thinks they’re more than onto something. Especially with the focus on private equity and other alternative investments.

We also said…

we know some older investors not only refuse to cite alternatives, but they sometimes view them with skepticism, if not disdain. Be it crypto or venture capital. This is as much about resisting change and not understanding something as anything else. 

Don’t be a skeptic who views new things with disdain!

To this end, it’s not crazy to say that younger people (at least, the ones who are doing well) often have more optimistic outlooks. 

As we get older, we develop thoughts and ideas on how things ought to be. So, we can be more resistant to change. In one respect, this makes sense. If you have done well with money — with investing — you might tend toward if it ain’t broke, don’t fix it. 

And, to a considerable extent, we agree.

The Juice remains committed to a three-pronged approach to investing:

• Your long-term nest egg, situated in low-cost index ETFs
• Speculate aggressively (but smartly)
• Diversity with alternative investments

Using real estate as an example, a thought about resistance to change or where if it ain’t broke, don’t fix it isn’t always the best strategy. 

If you read The Juice, you know that it’s tough — or, at least, super expensive — to buy property these days. But this doesn’t mean you can’t invest in real estate, even if indirectly. 

As we’ll discuss in The Juice next week, you can blend the traditional approach to indirect ownership (real estate investment trusts (REITs), which you can buy on the stock market) with an investment through an alternative platform that allows you to become a private real estate investor with very little money. You can get yourself a piece of the pie without a 20% down payment and monthly mortgage to pay. 

You can do likewise with private companies. You can be a venture capitalist even if you’re a small investor. In tomorrow’s Juice, we have some ideas on how to do just this. 

The playing field for small investors isn’t level, but it’s closer than it has ever been. Today’s DIY investors with relatively limited capital can invest in things (real estate, private companies, art, other collectibles) that were once reserved only for the 1%. 

This might help explain why younger people — the ones who seem to favor alternatives — are optimistic. 

In that BofA study, when asked how they feel about the U.S. economy, 51% of wealthy 21 to 43-year olds said they thought it was “very good” or “excellent.” Among the 44+ crowd, that number drops to 24%. On the global economy, the gap is even wider — 46% to 6%. 

This is telling. 

It’s also telling that — when you look at portfolio composition among the two groups — it shakes out like this:

• Alternatives make up an average of 17% of the portfolios of 21 to 43-y year olds compared to just 5% for people 44 and older. 
• A whopping 93% of younger investors say they plan to increase their allocation to alternatives in the next few years versus just 28% for older investors. 

And, for the really crazy part, right from the BofA report—

For wealthy people aged 21 to 43, portfolio allocations look about the same whether a person says they are conservative or aggressive, with all groups averaging a nearly even mix of alts, crypto, stocks, bonds and cash. In fact, the most “conservative” group is holding the highest average exposure to crypto.

This more aggressive — and, The Juice thinks, more forward-looking and optimistic — mindset holds when talking about everything from artificial intelligence to art.

• 83% of 21 to 43-year olds say “has the potential to improve my investment returns” versus 58% for the 44+ crowd. 
• Both groups view art as a serious investment that should be held and passed down to subsequent generations. 

Maybe there’s more optimism among younger folks because they have exposed themselves to this vast new world of alternative investing? 

Take all of this together and The Juice believes two things strongly: 

• The kids are alright, and despite how it feels in the media, 
• the future looks bright. 

The Bottom Line: Another goal we have is that, with each Juice you open, you can see the story unfold, feel that your understanding of alternative investments is growing and that new ideas are entering your arsenal. We’ll continue to define alternatives and provide examples through the end of the year and go into full portfolio construction/how to allocate mode in 2025. 

To that end, in tomorrow’s Juice, we focus on ideas. We’ll introduce some ways that you can invest in private equity. It’s literally something you can do with a few bucks. There’s nothing better than being able to test drive a platform or an alternative style of investing without putting too much money on the line. 

This is still long-term investing after all. You don’t invest in private equity or other alternatives to get rich overnight. They’re every bit as valid as stocks and play by many of the same rules and principles of long-term, buy-and-hold investing.

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