Author Topic: Thoughts on Alternatives to Stock/Bonds/REITs  (Read 1939 times)

FastStache

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Thoughts on Alternatives to Stock/Bonds/REITs
« on: March 12, 2015, 10:57:08 AM »
I currently have a solar hot water heater, and am about to get solar panels put on the house.

My average bill of 170 should go down to 0 after all the installs are down.

I currently have about an 80/15/5 split of stocks/bonds/REITs. I'm considering lowering my bond allocation due to looking at my decreased electric bill as sort of a bond.

What are some alternatives to stocks/bonds/REITS I could be looking at? How do I determine what is the actual value of my "bond" of the solar savings?

GGNoob

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Re: Thoughts on Alternatives to Stock/Bonds/REITs
« Reply #1 on: March 12, 2015, 11:04:53 AM »
I wouldn't personally consider that part of your bond allocation, but I would use the savings to increase investments or debt payoff.

hodedofome

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Re: Thoughts on Alternatives to Stock/Bonds/REITs
« Reply #2 on: March 12, 2015, 11:35:51 AM »
Yeah I don't think bonds are correlated to your electric bill :)

A lot of the 'alternatives' that institutional folks have talked about the past decade (forestry, commodities, oil rigs, private equity) are not sold to individuals in a good form. The fees can be crazy and you probably can't buy in sufficient quantity to be diversified. For commodities, yes there are ETFs but buying and holding commodities suck for long-term returns.

What you ultimately are after is uncorrelated returns to stocks/bonds/REITs. There really isn't anything out there that provides the same returns as those asset classes, to individuals at least, and are uncorrelated. OK, so if you knew what you were doing you could set up your own diversified trend following strategy using ETFs (or futures if you had enough money), but aside from that not much comes to mind. It remains to be seen how well implemented GMOM is, and how correlated it will be to stocks and bonds.
« Last Edit: March 12, 2015, 11:39:58 AM by hodedofome »

FastStache

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Re: Thoughts on Alternatives to Stock/Bonds/REITs
« Reply #3 on: March 12, 2015, 11:43:55 AM »
Yeah I don't think bonds are correlated to your electric bill :)

A lot of the 'alternatives' that institutional folks have talked about the past decade (forestry, commodities, oil rigs, private equity) are not sold to individuals in a good form. The fees can be crazy and you probably can't buy in sufficient quantity to be diversified. For commodities, yes there are ETFs but buying and holding commodities suck for long-term returns.

What you ultimately are after is uncorrelated returns to stocks/bonds/REITs. There really isn't anything out there that provides the same returns as those asset classes, to individuals at least, and are uncorrelated. OK, so if you knew what you were doing you could set up your own diversified trend following strategy using ETFs (or futures if you had enough money), but aside from that not much comes to mind. It remains to be seen how well implemented GMOM is, and how correlated it will be to stocks and bonds.

That does sum up what I am after, and another simple solution I've been contemplating is do something like lending tree and seeing how it goes.

I know you are big into trend following, and this is something that has always intrigued me, but at the moment I don't have much time on my hands.

forummm

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Re: Thoughts on Alternatives to Stock/Bonds/REITs
« Reply #4 on: March 12, 2015, 01:25:30 PM »
Buying solar panels doesn't count as an investment for income purposes, just like buying a larger house (to live in) with cash doesn't. Or deciding to stop using all gasoline and just walking everywhere. Those things reduce your spending--and therefore the amount you need to have saved. But aren't producing income.

msra8tm6

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Re: Thoughts on Alternatives to Stock/Bonds/REITs
« Reply #5 on: January 13, 2019, 04:17:06 AM »
I thought this might be an interesting space to post this as I too have been looking for uncorrelated assets / alternatives to add to my investment portfolio. The problem I find is that it is easy to find what you think is a niche asset but chances are you are buying equity of a listed business which ultimately means it is going to be somewhat correlated to equity markets. Ultimately as well I want almost all my equity market exposure through index funds rather than individual companies.

I have been pretty interested in the litigation finance space due to some knowledge I acquired through work. It's still a very nascent industry in most parts of the world - Australia being the most mature - with very few participants. The largest seems to be Burford Capital in the UK. I think this still means there are supernormal returns to be made but not without it's risks. I'll let you do your own research and form your own opinions on what litigation finance is? means? etc.

There is a US crowdfunding operator called LexShares (https://www.lexshares.com/). Has anyone on this forum used this with good experience? I think it would only be available to US investors.

There is a newly launched UK provider called AxiaFunder (https://www.axiafunder.com/) which may be of interest to UK residents. They just launched their first investment opportunity this week.

An article from the FT which folks might find interesting which I actually read last summer: https://on.ft.com/2o2nQO1


SeattleCPA

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Re: Thoughts on Alternatives to Stock/Bonds/REITs
« Reply #6 on: January 13, 2019, 08:57:34 AM »
I think this idea of looking for alternative asset classes holds merit... and it doesn't have to be that hard it seems to me.

E.g., rental property probably qualifies and does what OP asks:

https://evergreensmallbusiness.com/rate-of-return-on-everything-paper/

Private equity (like a small business) works.

https://evergreensmallbusiness.com/small-business-investment-returns/

Also, I think the solar panels for an individual works mechanically like a hedge fund's absolute return investment. (Investing say $10K to save $170/month on average for ten years provides a 16% rate of return that probably shows nearly zero correlation with US equities.) As OP notes, one just needs to look at the cash flows.

E.g., here's Google Sheets =RATE formula for $10K investment that saves $170 a month in utility costs... =rate(10,-170*12,10000)