Where’s Your Financial Parachute?

by Kimberly Yeh, Managing Director - Acquisitions

Who remembers the classic Bond scene from the 1977 movie The Spy Who Loved Me – the ski chase leading to that iconic moment when Bond hurtles off the edge of a snowy cliff into a spiraling free-fall?

That’s what I am reminded of when I think of the rise in interest rates and the looming impact on bonds. After the 2008 Financial Crisis, we’ve had nearly 10 years of historically low rates in the US. But rising interest rates have been steadily creeping up on us – the Federal Funds rate has nearly doubled since this time last year.

Over the past 3 years, the Aggregate Bond Index (“AGG”) returned a meager 0.97% annually. If you paid for a financial advisor, your actual 3-year average return is close to 0%. With continuing rate hikes on the horizon, many investors are realizing that they’re stuck with low yielding bonds that are at risk of losing more value.

Equities are also hovering on the brink of a bear market. Goldman Sachs’ Investment Strategy Group published a 5-year outlook on US equities and Municipal Bonds earlier this year. According to their forecasts, a low-risk investor with an 80% fixed income/20% equity portfolio, can expect a 2.68% return over the next 5 years, before adjusting for inflation[1]. Anemic returns like that, combined with the recent turbulence of the market, should prompt savvy investors to seek out alternative assets to re-balance their portfolios.

This is where we stop holding our breaths, wondering what comes next (and I don’t mean Bitcoin, which plunged below $4,225 to a 13-month low this month). In The Spy Who Loved Me, fortunately for Bond, he deploys a Union Jack parachute to the rescue. Fortunately for us, there are alternatives to the traditional investment options of stocks and bonds. Whether you’re chasing dividend yield, higher ROI, or simply seeking shelter from the market volatility, consider allocating a percentage of your investments to alternatives with low market correlation to increase returns and reduce risks. There’s no safety net at the bottom, so don’t be left without a parachute.

Click here to learn about Real Estate as an alternative investment.

About BENA Capital:

BENA Capital manages real estate investment funds, with a central focus on the acquisition and management of residential multifamily assets in growing markets.  BENA Capital's funds provide investors with ease of entry, reliable quarterly cash flow, and portfolio diversification.  Our proven strategies emphasize sound investing in carefully researched, quality properties that have steady, long-term capital appreciation potential.

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To learn more about BENA Capital, visit: http://www.bena-capital.com/

[1] Goldman Sachs, Investment Strategy Group, Jan 2018, 5-year nominal return for US equities at 3%, 5-year nominal return for Municipal Bonds at 2.6%