Alternative Investments: Non-Correlated Assets for a Better Portfolio

Alternative Investments: Non-Correlated Assets for a Better Portfolio

“Some people don’t like change, but you need to embrace change if the alternative is disaster.”

– Elon Musk

alternative investments not stock market

Investors have short-term memories, which is why so many cling to the stock market, even when it’s on a downward trend, or overdue for a correction.

If you have lost confidence in the market, or are simply looking for WHERE you can invest OUTSIDE of the stock market—safely and profitably—you’re not alone.

So why do even nervous investors still cling to mutual funds and stocks? We think it’s due to one of these reasons:

  1. “Already made up my mind.” They aren’t open-minded to try something new, even if they are unsatisfied with their current strategy.
  2. “Risk equals reward.” People mistakenly believe that the stock market roller coaster ride is required if they want to earn a good rate of return in the long run. (We’ve been well-conditioned to believe this! See this article about the insanity of risk assessment profiles.)
  3. “You don’t know what you don’t know.” Some investors just aren’t aware of other options. They lack the knowledge, confidence, and guidance to seek better alternatives.
  4. “What will they say?” People have relationships with investment reps, planners, and advisors who don’t offer alternative investments (or who actively steer their clients away from them because they don’t understand them, don’t sell them, or both.)
  5. Inertia. Sometimes, people have educated themselves and want to try alternatives, but it’s easier to put it on your “to do later” list and convince yourself that the sky really isn’t falling (at least not yet), so why not just avoid the topic with your planner, spouse, parents or friends who aren’t as open minded as you a little while longer?

Let’s face it: typical financial advice tends to give very limited options, fixating on “how much of your portfolio should be in stocks, and how much in bonds.”

We say, “Neither of the above!” Stocks and mutual funds ultimately rely on speculation, and bonds (depending on if you’re talking high quality bonds or junk bonds) range from “risky with fair returns” to “safe with weak returns.” you really stuck between high risk and low returns, as typical financial planning would have you believe?

No, you’re not!

Investments that are now considered “alternative” (because they are not the stock market) have been helping people build wealth for decades, even centuries before the financial planning industry even existed.

I never want to have to explain to a client why they lost money! For this reason, I only recommend assets which I believe to offer protections against loss of principle, and non-correlated investments that don’t rise and fall along with the stock market.

Below I list some of our favorite investments not correlated to the stock market. These investments have generated healthy single digit and low double digit returns for clients, without the roller-coaster ride of stocks.

Life Settlements: An excellent investment for growth non-correlated with stocks For those looking for excellent asset growth with minimal risk, life settlements are a very attractive option, offering investors a way to participate in the secondary market for life insurance policies.

Just as real estate deeds of trust can be bought and sold, so life insurance policies and the assets they represent are bought and sold on the secondary market. Life insurance has been considered an asset class since a Supreme Court ruling in 1911 judged that life insurance policies are private property that can be assigned or sold to others at the will of the policy owner.

Life settlements invest in life insurance by purchasing policies that have become unwanted, unneeded, or unaffordable to elderly policyholders. In this way, they represent a true “win-win” scenario. Policyowners nearing life expectancy are able to turn a death benefit into a living benefit they can use now. At the same time, investors are able to purchase an asset with a guaranteed future value, rather than grow an asset with an unknown, perhaps even lower future value.

Although most investors have never heard of life settlements, they have been used in institutional investing for decades. Some of the reasons life settlements have grown in popularity include:

  1. Returns are non-correlated. Life settlement investments are not correlated to interest rates, housing prices, stock prices, political events, or any outside influences.
  2. Very limited downside risk. Life settlements are based on actuarial math, not stock market speculation. As policies are purchased for a discount and costs such as future premiums are factored in, losses are unusual.
  3. You’re in good company. Results of course vary and are not guaranteed. However, sources such as have confirmed that Berkshire Hathaway and Bill Gates, along with major institutional investors, have invested hundreds of millions in life settlement portfolios.
  4. High Safety. Life insurance companies are among the strongest financial institutions in existence. Only seasoned policies are purchased for life settlements, and death benefits are always paid when the time comes.

Formerly for institutional investors only, there are now options for accredited  investors (with a net worth of 1 million and cash flow of $200k or $300k for couples) to purchase private equity funds that hold life settlements.

As with any investment, it is important to understand how it works and who it is best suited for. Life settlements are not liquid and the investment time frame and exact rate of return fluctuate. Required minimum investment with our life settlement partners currently begins at $100,000, and money is typically invested for 7-10 years.

Commercial Bridge Loans: Our Top Investment for Cash Flow 

diversify-investments-out-of-stocks Bridge loans on commercial and investment property can be an excellent choice for investors looking for immediate, steady, substantial income. Bridge loans allow investors to capitalize on real estate without the hassles of being a landlord.

Also known as “hard money loans,” sometimes they are “rehab loans” as well (though not always), bridge loans provide temporary financing (typically 6 months to 3 years) at higher-than-typical interest rates.

Real estate investors are eager to secure these higher-interest loans from private lenders because it has gotten more difficult to obtain financing for anyone with less than perfect credit. Bridge loans are often short-term loans made to other investors and business owners who need temporary financing and can demonstrate an ability to pay, or occasionally on lease-to-own homes.

Investing in carefully screened commercial mortgages and bridge loans can provide you with reliable monthly income with high single-digit and even low double-digit returns, with low risk… provided that the loans are properly vetted and sources.

There are many benefits of becoming a private lender for bridge loans that make it worth serious consideration for anyone who needs income:

  1. Reliable: Monthly income payments may come directly from the company that sources the loans, not the borrower. In some cases, the company that sources and services the mortgages even holds a secondary interest to assure your best interests are represented.
  2. Secure: Assets are backed with real-world assets, often secured by first position deeds of trust. Loan-to-value never exceeds 65% and is often lower, allowing for market fluctuations. Properties are valued by experienced professionals and borrowers are also vetted.
  3. Limited Risk: Although private investment mortgage funds can provide income for years, the underlying notes are held short-term (usually one year) to minimize risk in the event of a market downturn. And in the case of foreclosure, properties are sold to recoup investor’s equity.
  4. Healthy Returns: Private lenders (investors) working with us typically earn a minimum of 7% and a maximum of low double digits, depending on if you are accredited and what is available at the moment that is a “fit” for you.
  5. Flexible: Bridge loan notes and funds can be held in a self-directed Roth IRA for tax-free income (within your IRA or in your pocket, if you are over 59-1/2). Funds can usually be rolled over into new loans for continued cash flow.

The downsides to bridge loans are that there is quite a learning curve to finding and managing your own loans, and when working with other lenders, not all operate according to industry best practices that make protecting your principal a top priority. (We ask a lot of questions of our providers and are choosy who we refer to!) 

Four More Ways to Invest Outside of the Stock Market 

1. Direct Real Estate Investments Cash-flowing rental properties are a time-tested way to build wealth. Being a landlord can be time-intensive but rewarding. Some basics:

  1. Start small (perhaps renting out your old home when buying a new one;
  2. Crunch the numbers, always focusing on cash flow and not speculating on and counting on appreciation;
  3. Get good help and advice, from a real estate attorney to a great handyman; and
  4. Always have adequate cash for the unexpected. (See #4 below for our favorite place to store cash.)

2. Fractional Real Estate Investing

Accredited investors will find an opportunity to invest directly in commercial real estate by becoming private lenders for commercial projects, typically cash-flowing apartment buildings.

These types of investments offer qualified investors cash flow as well as equity, and help real estate investors avoid the most common (and most costly!) real estate investing mistakes, such as limiting themselves only to properties in their local area, not evaluating enough properties before purchasing, not forecasting future costs accurately or managing the properties effectively.

3. Peer Lending

peer lending alternative investment Also called “peer to peer lending” or “P2P,” peer lending cuts out the middleman – the banks and credit card companies – and allows people to lend using online websites such as  and as

For those who are just starting out, peer lending offers a way to start investing in a hands-on way, investing as little as a few hundred dollars. (At $25 per loan, you’d want to have your dollars in at least 10-20 loans.)

Returns are generally in the high single digits or low-double digits. We hear that people who are actively choose loans tend to do better than those who allow their portfolios to be randomly selected.

4. High Cash Value Life Insurance 

Life insurance is not an investment,” per say, but it is an excellent place to store cash while also providing permanent protection for a family. Life insurance has also become a top asset purchased by banks, known as BOLI ( bank-owned life insurance) by the billions in recent years as part of their Tier One assets.

Whole life policies constructed for maximum cash value are particularly attractive when one or more of the following is true:

  1. You want long-term savings. You desire to build equity and liquidity in a long-term savings vehicle that can outpace inflation;
  2. You value liquidity. You want the flexibility of being able to temporarily borrow against your savings for major expenses, emergencies, or lucrative opportunities;
  3. Increased life insurance protection is desired. Because death benefits are permanent and grow with time, families with term life insurance are wise to replace their term with permanent whole life policies as they are able.
  4. Multi-generational wealth is valued. (There are valuable benefits to insuring adult children and grandchildren as well as yourself.)

An excellent primer on how whole life insurance can be an ideal foundation of a larger wealth-building strategy is Kim D. H. Butler’s Live Your Life Insurance.

Now that you understand some of the best options for saving and investing using alternative investments…

Is it time for you to invest beyond the stock market?

Prosperity Economics helps people build wealth without Wall Street or the big banks. We educate people about new ways to invest and help them SUCCEED in saving, creating income, growing assets and reducing risk… by investing outside of the stock market.

When it comes to diversifying outside of the stock market with alternative savings and investment vehicles, that is our specialty! Contact us with any questions, or for help in sorting through your options and which might be a fit for your situation.

©Prosperity Economics Movement

mountain of debt.jpg

5 Things You Should NEVER Leave to Your Children

5 Things You Should NEVER Leave to Your Children

“You will only be remembered for two things: the problems you solve or the one you create.”
– Mike Murdock, American preacher

Unfinished Business Puzzle Pieces Hole Work Still to Be Done While inheritances are largely thought of in terms of financial legacies, there are many things that we “leave” for our children, including things they may not want! Our financial, emotional, physical, intellectual and spiritual legacy is hopefully a positive one, not one that burdens them.

Whether or not you have life insurance, assets, or a sizable estate that may one day be an financial legacy, here are five things that your children – however young or old they may be – are hoping you DON’T leave them.

1. A house full of clutter.

An acquaintance of ours just took 8 months off of work to sort through the packed basement, attic, closets, and rooms of her father’s home after his passing.

When one sister left her four-bedroom house full of things to her surviving sister to deal with, it took a high emotional and physical toll to have to clear the home of decades of “stuff,” not to mention deal with overdue repairs.

Another woman took trips from Seattle to the East Coast for over a year to clear the mountain of belongings and paperwork out of her father’s home… and she was not without assistance.

Yes, there are those who can be hired to help in such circumstances, such as professional organizers who specialize in clearing estates. However, it can be difficult for family members to delegate such tasks of sorting through family treasures—and family junk—to strangers, even when the personal cost of not getting help can be high.

Start giving things away now. Don’t leave all the “stuff” stored in your attic, basement, garage or junk room for your loved ones to sift through someday. Give the treasures to family members who appreciate them, and don’t stop until the clutter is gone and nothing but a few boxes of holiday decorations remain.

If you need help or find yourself overwhelmed to the point of inaction, hire out or call on family members. It is far more satisfying to have a family garage sale and recycle/donation weekend during the good times than to have to sift through piles of belongings during a time of grief.

“Lighten Up” workshop creator Laura Lavigne teaches clients a mantra to help them sort. “Is an object ‘actively used or deeply cherished’? If not, let it go.”  Lightening your load will lessen your burden and help you to leave a better legacy.

2. A paperwork mess

Businessman with big piles of paperwork Todd Tresidder shared a heart-breaking story on his blog about the aftermath of his father-in-law’s passing and the legacy he didn’t intend to leave. Unfortunately, his family’s experience is not uncommon.

Todd’s father-in-law was a good man with good intentions. However, he left one heck of a mess for his loved ones. Not only did the family have to confront a storage locker full of useless, outdated junk, they had other, more difficult challenges left by his unfinished business.

As Todd tells it, his father-in-law had always planned on “getting his accounting records together and filing several years of delinquent, back taxes.” But he passed away unexpectedly before he even turned 65, leaving his children with the impossible task of preparing tax returns with incomplete records.

And the hassle was only the beginning. “They had to personally sign and take on liability for those back taxes,” said Todd. “He planned on living longer and eventually getting around to these things, but he never did. Life had a different plan….”

Don’t leave the paperwork you didn’t want to deal with to others. If you don’t want to tackle this burdensome task, your children certainly don’t either! Hire a bookkeeper, an accountant, or whoever you need to sort it out. Ask for help from the family if you are unable to deal with it yourself, they would rather help you now than be left with your mess later.

3. A mountain of debt.

mountain of debt.jpg The woman who left behind her 4-bedroom house full of things also left behind tens of thousands in credit card debt from years of living beyond her means.

Todd’s father-in-law had dropped his health insurance because it was “too expensive.” He thought he could do without it until he was old enough for Medicare to replace it, but he never made it. His children were left to negotiate and settle a pile of medical bills that consumed their father’s life savings and bankrupted his estate.

And every day, people die without proper estate planning or trusts that leave their heirs responsible for settling debts.

One reason we advocate for whole life insurance is that the death benefit can replace assets that must be spent when “life happens,” or when the paid-off house must be sold or mortgaged to fund long-term care. And now there are whole life insurance policies with riders that allow a sizeable part of the death benefit to be spent on long-term care while the insured is still living, helping them to avoid either running out of money due to medical bills, or the possibility of paying for long-term care insurance that is never needed.

One way or another, find a way to resolve your debts. If you are unable to repay your debts or settle them for a negotiated amount, then bankruptcy might be a viable alternative. A major reason people enter into bankruptcy is because it offers them protection from their creditors. Bankruptcy also offers the same protection to a person’s estate, thus protecting heirs who would otherwise have to pay debts from the proceeds of the liquidated estate.

4. A Family Feud

FAMILY FEUD One way to start a family feud is to leave siblings with differing amounts of an estate. And regardless of their financial habits or history, anything other than an equal split is likely to leave someone crying “unfair!”

Another way to start a family feud is to not have an up-to-date estate plan in place. Too many people “intend” to organize their financial affairs and assemble an estate plan. Instead, they left a mess of contradictory documents and incomplete plans that pit family members against each other.

Failure to keep beneficiaries up to date can also create chaos and ill will. Sometimes, divorced spouses or divorced spouses of children are still listed as beneficiaries of an estate, while younger grandchildren, nieces or nephews (born since the last updated will) have never been added! Clearly, that was not what was intended.

Be clear, consistent, and complete with your estate plans. Establish a will, and a trust, if applicable to your situation. Update it every few years, or at the very least, when there is a change in the family structure of a family, such as a death or divorce.

Need help to get started? Contact the National Network of Estate Planning Attorneys, they have an excellent process to help families communicate effectively.

5. Confusion and a lack of communication.

Lenore Vassil created as the result of her father’s illness, which left him temporarily unable to run the household or pay the bills. Following that experience, she watched as a pregnant friend lost her boyfriend and father of her unborn child in an accident. The family searched for weeks, not knowing if there was a life insurance policy or not.

Family members may talk frequently, but are they having conversations about the things that would really matter in an emergency? Usually not. The lack of communication creates pain and confusion as those remaining are left to wonder:

  • What lawyer, financial advisor, CPA or insurance agent should be contacted?
  • Where are the important documents stored, and which documents should we expect to find?
  • Who is the family doctor, and is there a durable POA?
  • How does the mortgage get paid, anyway? Knowing what bills are on “autopilot,” which aren’t, and how the family financials are tracked is crucial.
  • Then there are the more personal logistics… Where are the car keys? Are there instructions for taking proper care of the dog? And the list goes on.

Communicate thoroughly and pro-actively. My grandmother had a green notebook that listed all of the essential information and detailed where to find what, and everyone knew where the green notebook was. does what my grandmother’s green notebook did, but it’s easy, digital, and can be updated and shared with others across the country. Best yet, it thinks of everything so you don’t have to. Start an account and share the five most important things your loved ones need to know for free.

Get Started on Your To-Do List Now

priority-list.jpg It’s easy for an article like this to invoke feelings of overwhelm. But if YOU’RE overwhelmed by your unfinished business, do you really want to leave it to your loved ones to complete?

Anything that drains your energy will become an energy drain for your loved ones if—or rather, when—something happens to you. So start finishing your unfinished business today. It doesn’t matter that you may well live 30 or 40 more years, because who wants to live that long with unfinished business hanging over their head!?

Envision what you would like to leave for your loved ones—beyond the financial legacy. And if you assess that you are in danger of leaving a legacy of clutter, confusion, and unfinished business, then start taking action now. Make a list and set aside time to work on your list. With regular action-taking, you’ll be able to celebrate having your “ducks in a row” before you know it.

And, of course, let us know how we can assist you! Whether it’s financial guidance, life insurance, an estate planning referral, or something else, we’re here to help.

©Prosperity Economics Movement