Current market volatility is understandably keeping investors on edge and stalking their portfolios very closely. No matter what your portfolio might look like, with 5 or 15 investments, you might have seen them take a hit in the last few years. There are many pros and cons to choosing a private market to invest in, and no matter what, investing with intention and risk factors in mind is a must. If your portfolio lists private market investments, managing liquidity and volatility is critical to an increased ROI when choosing to sell or pull out.
Assess Your Current Portfolio and Look For Improvements
What are your current investments tied to? One of the most significant aspects of having a thriving portfolio throughout the highs and lows of the market is to have a properly diversified one. As you are involved with the private market, your investments might be in venture capital, buyouts, credit, or growth assets. Diversifying between private and public markets allows you to choose investments of different volatility. When creating a profitable portfolio, it could be wise to have a period of time where some investments will produce positive returns while others will produce negative returns. This keeps a strong balance.
When managing the liquidity and volatility of your portfolio, stop looking at them as hindrances and start looking at them as ways to diversify your assets better. One way you could get the most out of your assets is to stretch them between different markets.
Allocate Your Assets to Your Benefit
Next to diversification, allocating your assets is important to managing the liquidity and volatility of private market investments. Asset allocation can be considered influential to one’s risk tolerance. Many investors might not realize the actual risks within their portfolio until all their assets are in the negatives. A balanced portfolio of assets, such as a mix of public stocks and bonds and private venture capital, could be one way you continuously earn profit through high and low market changes.
Strategize Around Your Situation, Risk Level, and Wealth Goals
Your situation is going to look different than a peer’s. Your investment choices should not be based on what those in your industry are pooling their resources in but on what makes sense in your current portfolio and where you visualize your wealth to be in the upcoming years. Where one investor sees an extremely volatile market, you might see a market that can be a counterweight to your current ones. Consider your investment goals and situation while assessing your risk tolerance to see what your portfolio could and could not handle. Many investors may benefit from a more diverse portfolio with higher return potential that can be found in more considerable assets, but no matter what, substantial due diligence should be done about fund structures and fees before taking the investment opportunity.
Diversification, proper allocation, and a change of mindset over investments could be your keys to managing the liquidity and volatility of private markets. Whether you gravitate toward credit, buyouts, or venture capital, ensure you appropriately manage your wealth and risk. If you want to learn more, contact the team at Family Office Association.