UTICA – Typical investments in stocks, bonds and money market funds still form the basis of most investment portfolios, but alternative investments can offer a variety of ways to diversify, says a wealth management professional from ‘Utica.
“There’s a whole other universe of ways to make money,” says David K. Griffith, owner of DK Griffith & Company, located at 2018 Genesee St.
Alternative investments available in the market can include private equity, hedge funds, managed futures, art and antiques, commodities, foreign currencies, digital currencies, and real estate.
While traditionally these types of investments were only available to the wealthy, economic changes in recent years have opened up more opportunities for retail investors, notes Griffith.
His firm has been offering alternative investment opportunities – such as real estate, foreign exchange, gold and oil wells – to clients for years, but Griffith has noticed a marked uptick in interest lately. . “It’s an interesting trend I see in the markets,” he notes.
The Jumpstart Our Business Startups (JOBS) Act of 2012 opened the door to many alternative investments by relaxing the Securities & Exchange Commission’s regulations on small businesses. One of the most common investment opportunities to come out of the JOBS Act is crowdfunding – think Kickstarter campaigns and mini-IPO offerings. These options have allowed non-accredited investors – those who earn less than $200,000 a year and have a net worth of less than $1 million – to take advantage of these opportunities.
There are a number of benefits to such investments, Griffith says, and investors should choose the options that best suit their goals.
“It depends on what you’re looking for,” says Griffith. An income-based option might be a good choice for those approaching retirement age. Other options could come with significant tax breaks. “There are even some that partially return your capital to you,” he adds.
Alternative investments often don’t follow market trends, Griffith says, often producing positive returns when the market is down. This makes it a useful way to diversify a portfolio.
Of course, with all the pros, come the cons, he says. One of the disadvantages of alternative investments is that they tend to be illiquid compared to conventional investments, meaning there may be a lock-in period required before investors can withdraw their money. In some cases, the investment, such as a work of art, might be harder to convert to cash than it would be by selling shares.
Riskier investments, of course, can bring greater rewards, but it’s crucial that investors do a comprehensive risk-return matrix, notes Griffith. Due to the SEC’s more lax oversight, scams are common with alternative investments, and investors should beware.
“With a lot of these investments, what we’re looking for is a good exit plan,” he notes. His firm has a team of lawyers and also subscribes to research providers to thoroughly review any alternative investment option before recommending it to clients.
Founded in 2006, DK Griffith & Company currently has over $100 million in assets under management for over 300 clients. The company offers a range of services, including business advice, financial planning and ongoing investment management. It currently employs four people.