Thomas H. Ruggie, ChFC®, CFP®, Founder & CEO of Destiny Family Office, discusses the increasing interest in alternative investments among mass affluent investors. Historically, alternative investments were primarily utilized by high-net-worth individuals, but more and more mass affluent investors are seeking to diversify their portfolios with these opportunities. According to a report from Ernst & Young, adoption of alternative investments by mass affluent investors is expected to increase to 32% in 2024. However, Ruggie emphasizes that alternative investments are not for everyone and require careful consideration before incorporating them into a portfolio.
Ruggie highlights several key factors to consider when evaluating the appropriateness of alternative investments, including the learning curve involved. Investors must take the time to understand the market and investments being considered, along with factoring in their own situation, goals, and objectives. Another challenge with alternative investments is the lack of transparency compared to traditional investments. Information on alternative investments can be difficult to find and outdated, making it challenging for investors to manage expectations and understand the performance of their investments.
Additionally, tax reporting for alternative investments can be more complex, as reporting often lags behind traditional investments, requiring investors to file for tax extensions. Despite these challenges, alternative investments offer a lower barrier to entry compared to traditional options, with some opportunities having thresholds as low as $10,000. Furthermore, alternative investments offer better liquidity, allowing investors to access their investments sooner with fewer penalties compared to traditional options.
Overall, Ruggie believes that alternative investments can provide unique opportunities for mass affluent investors who take the time to understand their differences from traditional investments. It is important for investors to consult with a licensed professional before making any investment decisions. Ruggie’s insights highlight the growing interest in alternative investments among mass affluent investors and the importance of careful consideration when incorporating them into a portfolio.
