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The 60/40 portfolio, or 60% stocks and 40% bonds, has been a keystone of financial planning for the last five decades given its ability to weather numerous market cycles.
STOCKS & BONDS • 60/40 PORTFOLIO • IMPACT INVESTING • ALTERNATIVES
This has been the result of being able to benefit from appreciation of stocks over decades and protection from the bond portfolio which has performed well in downturns such as the dot-com bust and the global financial crisis in 2008-2009. However, 2022 has been a different story with stocks and bonds having their highest correlation over the past decade. This has led to the 60/40 portfolio having one of its worst years since 1937.
We have witnessed many investors question how diversified their portfolios are in traditional asset classes like stocks and bonds given highly correlated returns more recently. This has led them to seek diversifying alternatives in the private markets space where they can reduce portfolio volatility while also enhancing returns. Opportunities we are seeing within this space include:
Private real estate is a great diversifier for portfolios that can provide many benefits over multiple market cycles. Benefits of the category include:
These assets provide essential or necessary services, have long useful lives and generate cash flow and earnings that vary minimally through market cycles. An example could include renewable energy assets such as solar or wind power that sign 20-to-30-year contracts for energy production with a customer such as a local utility or a large corporation. Benefits of these assets include:
Private market debt has grown significantly since the global financial crisis as banks have dramatically reduced lending to meet regulatory and capital requirement needs. This has led to private funds becoming the main source of financing for private equity firms that are seeking to buy and sell companies. Private debt can also be used for real estate projects and other ventures. Benefits include:
While we don’t know what the future holds, we do know that diversification and compounding over long periods of time works well for investors. Diversification in this case is not just traditional stocks and bonds, but multiple asset classes in both the public and private markets. Further, having some assets illiquid has provided better returns by reducing the impulse to sell during market disruptions.
Learn more about ways to diversify your portfolio by reading our white paper on opportunities to invest in Private Markets.
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*Financial projections or returns displayed on the website are estimated predictions of performance only, are hypothetical, are not based on actual investment results and are not guarantees of future results.
Disclosures: No communication by Citizen Mint Inc. or any of its affiliates (collectively, “Citizen Mint”), through this website or any other medium, should be construed or is intended to be a recommendation to purchase, sell or hold any security or otherwise to be investment, tax, financial, accounting, legal, regulatory or compliance advice. Nothing on this website is intended as an offer to extend credit, an offer to purchase or sell securities or a solicitation of any securities transaction.
Any financial projections or returns shown on the website are estimated predictions of performance only, are hypothetical, are not based on actual investment results and are not guarantees of future results. Estimated projections do not represent or guarantee the actual results of any transaction, and no representation is made that any transaction will, or is likely to, achieve results or profits similar to those shown. In addition, other financial metrics and calculations shown on the website (including amounts of principal and interest repaid) have not been independently verified or audited and may differ from the actual financial metrics and calculations for any investment, which are contained in the investors’ portfolios. Any investment information contained herein has been secured from sources that Citizen Mint believes are reliable, but we make no representations or warranties as to the accuracy of such information and accept no liability therefor.
Private placement investments are NOT bank deposits (and thus NOT insured by the FDIC or by any other federal governmental agency), are NOT guaranteed by Citizen Mint or any other party, and MAY lose value. Neither the Securities and Exchange Commission nor any federal or state securities commission or regulatory authority has recommended or approved any investment or the accuracy or completeness of any of the information or materials provided by or through the website. Investors must be able to afford the loss of their entire investment.
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