Today we’re diving into the world of alternative investments (a.k.a. alts)–opportunities that are often marketed with the promise of high returns and diversification, but frequently come with hidden risks and complexities.
In this episode, Hilary shares the professional insights and experiences she’s gleaned about alts in her 25+ years as a fee-only fiduciary financial advisor with deep expertise in public markets. From high fees and lack of transparency to liquidity issues and potential for fraud, she breaks down why these investments may not be the golden ticket they're often marketed as–and explains how Hendershott Wealth Management® designs client portfolios instead.
Tune in to learn:
- Why alts are so appealing to high net worth investors,
- Some of the biggest risks and pitfalls of alternative investments,
- How to make informed decisions about your investment strategy, and
- Why we believe a well-diversified, low-cost portfolio is the best–and most evidence-based–path to financial security.
Bottom line: The actual experience of holding alternative investments is not conducive to the kind of elegance, simplicity, or peace of mind we pursue for our clients and want for you.
Here’s what you’ll learn in this week’s episode of Love, your Money®:
- 01:40 What alternative investments are, what contributed to the rise of them, and why they remain so alluring
- 05:20 The fee structure of alts compared to the fee of a low-cost, globally-diversified index portfolio–and an example of their impact on returns
- 06:00 Talking liquidity: How accessible is your wealth when invested in alts, and what are typical lock-up periods?
- 08:25 Strike three against alts: Lack of transparency and the difficulty of actually being able to value your holdings
- 10:07 Alternative investments + fraud = a few real-world stories you might recognize
- 11:33 Comparing returns from the Teacher Retirement System of Texas (TRS) with the Public Employees' Retirement System of Nevada (PERS) – and making it real for you
- 14:35 Stories about the failures of alts, including high end art, a managed futures fund, angel investments, and CEO theft
- 20:30 The Hendershott Wealth Management® investment philosophy, AKA why we will never accept default risk and what we do prioritize, instead
- 24:12 My final verdict on alternative investments, and how to evaluate investment opportunities
Show Notes
To get access to the full show notes, including all the resources mentioned, visit: https://hendershottwealth.com/podcast/do-you-need-alternative-investments
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Hendershott Wealth Management, LLC and Love, your Money do not make specific investment recommendations on Love, your Money or in any public media. Any specific mentions of funds or investments are strictly for illustrative purposes only and should not be taken as investment advice or acted upon by individual investors. The opinions expressed in this episode are those of Hilary Hendershott, CFP®, MBA.
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