Planning for retirement isn't easy. Annual pension allowances are shrinking, dividends and buy-to-let (both traditional sources of income for retirees) are facing increased tax burdens and HMRC interest, and bond yields are at a historic low (as are annuity rates). Pair that with the fact that we're living longer than ever, and the risk of outliving one’s savings becomes a real concern.
Now is the time to think about your options.
One way of topping up your pension is through alternative investments, which can provide uncorrelated returns, portfolio diversification and even, dare we say it, fun.
What are alternatives?
Alternative investments include investments in tangible assets, such as art and wine, as well as financial assets, like cryptocurrency and private equity – basically anything falling outside the purview of the more ‘traditional’ investments: cash, bonds and stocks.
Since they have a low level of correlation with traditional investments, and therefore are less exposed to market conditions, alternative investments can be used as a way of reducing the overall risk of your investment portfolio by diversifying it.
Here are a few alternative investments you may want to consider.
Start early
Plenty of articles have been written about getting started early with your pension and letting compounding do the rest. What about alternatives? Getting involved at an early stage as an investor means you get well ahead of the big money (pension funds, asset managers, etc), which tend to focus more on later-stage businesses.
By investing early, you get in on the ground level of a company before it even appears on the radar for VCs, by which point the valuation should be markedly different.
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