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Tax-Advantaged Alternative Investments

Tax-Advantaged Alternative Investments

By Wealth Management Solutions 

Our advisory process diversifies your investments so you are not tied up primarily in just stocks and bonds. We proactively manage your retirement accounts, even those at your employer, as part of your complete investment picture. Many successful investors consider alternative investments as a valuable opportunity to broaden their investment horizons, and we diversify clients’ portfolios through their retirement accounts. These investments can range from tangible assets like precious metals or fine art to more conventional financial investments such as venture capital or private equity. But how do you know if they fit into your portfolio?

The fact is, we do not use alternative investments as another diversification “tactic”—we carefully evaluate how to align your investment strategy with your unique situation. While alternative investments can be useful for reaching your goals, it’s crucial to explore them within the framework of a comprehensive investment management strategy. 

Benefits of Alternative Investments

One of the strongest arguments for investors to utilize this class of investments is the fact that alternative investments have a lower correlation to the stock market. This can add much-needed diversification to a portfolio, which assists investors in reducing volatility and potentially being better prepared for retirement.

Keep in mind, diversification is not our sole focus. Part of our proprietary 4-step process focuses on your asset allocation and risk profile to determine whether alternative investments may be suitable for your specific scenario. As appealing as potential returns may seem, we look beyond performance to determine whether these investments would truly add value to your portfolio.

Tax Advantages

As part of our in-depth planning process, alternative investments can offer certain tax advantages. That’s because the way a particular alternative investment is structured can enable the investors to keep more of their profits. Also, investors can become part owners of a fund, and any tax benefits available to the fund can get passed on directly to the investor-owner. 

Additionally, because you can invest through certain retirement accounts, such as an IRA, your investment can be tax-deferred or tax-free. Since every situation is unique, consult with one of our trusted financial advisors to determine whether alternative investments should be part of your tax strategy.

What to Consider

Some drawbacks to consider are the illiquidity of the investment—especially as it relates to your income circumstances. While some alternative investments offer income immediately, many of them are wrapped up in a physical asset, which makes it difficult for investors to get any return right away. That’s why we take a comprehensive approach to planning, to walk alongside our clients while they steer clear of financial commitments that could be detrimental over the long run.

Additionally, some alternative investment strategies often also have higher fees associated with them. This means it’s vital to weigh any potential benefits against the expense. 

Lastly, it’s crucial to understand your tolerance for risk and how it can evolve over time. The fact is, alternative investments can offer more volatility than an average investment: While there can be incredible gains associated with the investment, there also can be very dramatic losses. This is why we establish your risk tolerance each year in an annual review session together.

A Guided Approach to Alternative Investments

There are numerous types of alternative investments, each with its own set of advantages and drawbacks. If you’ve primarily invested in the stock market, diversifying your retirement portfolio with alternative investments could be beneficial to your overall plan. At Wealth Management Solutions, LLC, our planning is your future. We work with you to determine whether alternative investments align with your financial goals and can provide a fully integrated investment strategy tailored to your situation. 

Reach out and together we’ll create an investment plan to pursue your goals. Schedule a complimentary consultation by contacting us at (949) 475-9700 or info@wms-llc.com

About Wealth Management Solutions

The story of origin: Wealth Management Solutions was created in 2003, following the personal family tragedy felt by the founding partner of the firm. Richard Riva lost his father unexpectedly and before any legacy planning was done that could have extended his family’s legacy beyond the fourth generation. Our partners and team members all share similar experiences due to a lack of planning for their families and are committed to preparing the next generation with the advice, planning, strategy, and governance to manage company assets, stocks, or inherited wealth. This is why we say: Our Planning; Your Future. 

All investing involves risk, including loss of principal. No strategy assures success or protects against loss.

The opinions voiced in this material are for general information only and are not intended to provide specific investment advice or recommendations for any individual. 

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