The numbers are in, and they’re not looking good: 2022 saw the largest stock market declines since 2008.
According to Wall Street Journal reports, the S&P 500 posted a 19% decline in 2022. The Dow Industrial fell by 8.8%, and the Nasdaq by 33%. And though many people expected growth to slow in 2022, this was a much more dramatic decline than expected.
In this environment, it’s more important than ever to make sure you’re diversifying your investments. If you haven’t already invested outside of the stock market, now is the time to get started.
3 Benefits of Investing in Private Funds for 2023
Private funds — like the ones built on Avestor’s customizable fund platform — offer several key advantages in any environment, but especially in an economic downturn. In particular, here are four of the biggest advantages of investing in real estate or other alternative assets through a private fund.
1. Reduce Your Investment Risk Through Diversification
If your investment portfolio or retirement account consists only of stocks, mutual funds, and ETFs, then your investment success will depend entirely on the volatile, unpredictable stock market.
By investing in a private fund, you can easily diversify your portfolio with alternative investment opportunities, including recession-resistant real estate assets, debt financing, and more. The performance of these investments is not tied to the rises and falls of the stock market, so they can add a level of stability to your portfolio in the midst of a stock market downturn like the one we’re currently experiencing.
And with Avestor’s fund marketplace, it’s easier than ever to find private funds that fit your goals. Once you join a fund, you can also invest on a deal-by-deal basis, choosing the opportunities that will diversify your portfolio across different asset classes, markets, investment strategies, and timelines.
2. Seize the Opportunity to Invest in Real Estate Debt
In a high-interest environment like the one we’re in currently, real estate debt is an especially strong investment opportunity.
Many newer investors are unfamiliar with this concept, but it’s actually rather simple: rather than investing in a property in exchange for equity, you invest in the loans used to fund a real estate project. These loans are relatively short-term compared to other types of real estate investments: usually between 12-24 months.
Currently, real estate debt rates are around 8-12% annually, which is double the returns of other common debt types like CD and bonds. Like other alternative investments, this investment type is not correlated with the stock market, so we believe it will continue to deliver strong returns in 2023.
3. Know Who You’re Investing With
When you invest in a private fund, you have the opportunity to build a relationship with the fund manager and know exactly who you’re trusting with your money. Unlike investing in the stock market — which can feel relatively anonymous, especially if you’re doing it on your own — private funds tend to be much more relationship focused.
Most of the private funds on Avestor’s platform are capped at 99 investors to comply with SEC regulations — so it’s much easier for you to get in touch with your fund manager anytime you have questions.
This is especially valuable in a recession or economic downturn, because you can have peace of mind knowing that your wealth is invested with someone you trust, and that you have access to a valuable resource for getting your questions answered and learning about new opportunities.
If you’re interested in learning more about the private funds on Avestor and the way they can help you prepare for the coming months, please visit our fund marketplace. Here you’ll find an overview of each fund on our platform, and a chance to get in touch with the fund manager directly.