A recent World Economic Forum report paints a bleak picture for young people across the globe. In addition to the mental health crisis caused by the pandemic, they are facing rising inequality, climate change, and automation.
Facing the highest inflation in a generation, young people are turning to investments in search of a better future. Gen Z has demonstrated a heightened consciousness for spending and savings habits, as 12% have already initiated their retirement savings, while 35% plan to begin saving in their 20s. This is a marked change from previous generations, who often didn’t start thinking about retirement until they were in their 30s or 40s.
However, the prospects for young people’s investments are dismal. According to Credit Suisse’s investment returns yearbook, they can expect average annualized returns of just 2%. This is far below the historical average of over 5% real returns.
In a “low-return world,” Gen Z is turning to high-return, high-risk investments. A poll of 2,000 UK investors showed that 62% of Gen Z have invested in alternative investments like cryptocurrency, fine wine, and art, compared to just 46% of investors overall.
Further, the majority of users on StockX, the world’s largest online marketplace for buying and selling limited edition products, are Gen Zers. And it’s not just because they’re more comfortable with technology. Gen Zers are savvy investors who are looking for ways to hedge against inflation.
Though young, Gen Z has already shown itself to be a force to be reckoned with when it comes to investing, with 9 in 10 surveyed saying they were investors or had considered investing. Given their earlier start, their unparalleled interest in alternative investments, and their willingness to take risks, Gen Z incomes are projected to surpass those of millennials by 2031. They are the future of wealth, and they are shaping the future of investing.
Very little has been written about the unique financial challenges and opportunities that will face Gen Z’s wealthy segment. Indeed, RBC’s Wealth Management Report defines “younger HNWIs” as “people born between 1965 and 1997,” leaving out Gen Z altogether.
This is a huge oversight, considering that there are already 2,000 Gen Z and millennial millionaires in the UK alone, an increase of 100% from the previous year. And this number is only going to grow, with 59 percent of Gen Z surveyed expecting to become millionaires through cryptocurrency investments.
What’s more, a full 60% of China’s college students say they expect to be millionaires. With such high expectations, it’s no wonder that Gen Z is already making waves in the world of high finance. In fact, Gen Z is seeing its share of billionaires, including Kylie Jenner, Alexandra and Katharina Andresen, Kevin David Lehmann, and Wang Zelong.
This is just the beginning, and as Gen Z’s interest in alternatives grows, we can expect to see even more young HNWIs in the years to come.
The rise of Gen Z HNWIs will have a profound impact on the future of wealth. As such, it’s important for RIAs to start catering to this demographic now.
One key is to offer alternative investments that cater to Gen Z’s interest in high-risk, high-return assets. Enter Gridline, a digital wealth platform that enables access to professionally managed alternative investment funds with lower capital minimums, fees, and greater liquidity.
The firm’s mission is to open up access to top-quartile private market alternative investments, historically only available to sophisticated family offices and endowments — allowing individuals to invest in a transparent, efficient, and lower-cost manner.
In other words, Gridline is committed to making it easier for everyone—not just the wealthy few—to invest in private markets in a way that aligns with their values. This is something that Gen Z HNWIs are sure to appreciate.
Large investors have no problem overcoming the $25 million minimums common to PE funds, but they face other challenges when it comes to private markets.
For one, large VC funds tend to underperform smaller funds. According to an Invesco study, the average IRR for funds under $400 million was 19 to 20%, as compared to funds of $400 million to $1 billion with an IRR of 7.2%, and funds above $1 billion with an IRR of 2.4%.
Not only that, but large investors still need to diversify their portfolios to manage risk. The challenge, then, is expanding one’s relationships to find high-quality small and medium-sized private market funds. Often overlooked, these firms are hungry to succeed, more nimble than their larger counterparts, and can provide excellent returns.
New fund managers may be overlooked for a variety of reasons: they don’t have the same name recognition, they don’t have as much money under management, or they’re not in the same networks as larger firms.
That said, emerging fund managers consistently outperform large firms. In fact, PitchBook research finds that “nearly 18% of first-time funds nab an internal rate of return (IRR) of 25% while later funds only exceed that number about 12% of the time.”
A multitude of factors plays into these outperformance numbers. For one, funds with a high number of simultaneous investments underperform, due to diseconomies of scale. Additionally, smaller firms are often more nimble and have lower overhead costs. They’re also generally more attuned to the latest trends and technologies.
But it’s not just about numbers and efficiency; emerging managers also bring a more diverse set of perspectives and experiences to the table. This can lead to better decision-making and a greater ability to identify opportunities. It’s no surprise, then, that the NAIC found that firms with diverse ownership generate superior returns. These advantages explain why the likes of Reddit’s co-founder Alexis Ohanian have announced new VC funds focused on emerging managers.
So, if you’re looking for the best chance of finding and investing in the most promising companies, don’t overlook the new kids on the block. Emerging managers may just be the best positioned to deliver superior returns.
Finding these overlooked funds presents an opportunity to augment your portfolio with higher-performing assets. After all, large endowments ($3B+) work with an average of 136 different private managers.
Achieving endowment-level portfolio construction presents an enormous administrative challenge, both in terms of due diligence and management. This limits the ability of most investors to take advantage of this opportunity.
Gridline is a platform that provides access to a broad cross-section of the private markets. Having recently brought on a senior investment advisor who was CIO for a multi-billion SFO, we’re well-positioned to provide endowment-level portfolio construction for everyone.
We handle the administrative burden of investing in private markets, from fund selection and due diligence to performance reporting and tax management. We believe that our net returns will beat the market, making us a valuable partner for large investors looking to take advantage of the opportunities in the private markets.
While large investors have the access and resources to write large checks to private market funds, they may be overlooking the best opportunity for realizing superior returns: smaller private market funds and emerging managers, which are often nimble, efficient, and more in touch with the latest trends. Gridline can help large investors take advantage of these opportunities, without the administrative burden.
Individual investors consistently underperform market indices at an average of 1.5% per year. Performance is even worse in volatile times, with individual investors underperforming the S&P500 by 11% in March 2021.
The more active the individual investor, the worse the performance. According to a Berkeley study, “the vast majority of day traders are unprofitable, and many persist despite an extensive experience of losses.”
As Warren Buffett puts it, “I don’t think most people are in a position to pick single stocks,” They underperform because they lack the requisite diversification, research, and objectivity. Investors who conflate their hobby of stock-picking with serious investing often make novice mistakes, and behavioral biases can compound these costly errors.
In reality, they would be better off investing in index funds. Index funds provide diversification and remove the need to pick individual stocks. The same principle applies to private market investing for most investors, but diversification is prohibitively expensive due to high capital requirements and lack of liquidity. Gridline enables low-cost diversification in the private markets.
The return dispersion for venture capital and private equity is much higher than for public equities. This means that the penalty for picking the wrong investment is even more painful than with public stocks.
One reason for this higher dispersion is that private companies are much less efficient than public companies in allocating capital. Private companies also tend to be more levered, and leverage magnifies both upside and downside risk.
Given the higher risk and higher dispersion of returns in private markets, indexing can help investors achieve more consistent results. By investing in a basket of private companies, investors can smooth out the ups and downs of individual companies and achieve more predictable returns.
The efficiency of public markets has been a topic of debate for decades. The efficient market hypothesis (EMH) posits that all investors have access to the same information and that prices reflect all available information.
However, the EMH does not hold for private markets. In private markets, there is a lack of transparency and an asymmetry of information between investors and issuers. As a result, prices in private markets are not as efficient as in public markets.
This lack of efficiency allows active managers to find attractive investments mispriced by the market. By investing in a basket of companies through Gridline, investors can gain exposure to a wide variety of private companies and benefit from the potential inefficiencies in the market.
Investors in private markets should diversify across several factors, including asset class, geography, and investment stage. Research highlights that investors can simply minimize private market return dispersion by diversifying across these factors. Diversification is the only free lunch in investing, and it is especially important in private markets where return dispersion is high.
Participating in private markets presents immense opportunities for alpha generation and wealth creation, with top-quartile VC funds outperforming the S&P by ~2X over the last 5-, 10-, 15-, and 25-year periods. However, adequate fund selection and diversification require rigorous due diligence, a structured methodology, and access to a large universe of managers.
Gridline enables investors to gain exposure to a broad cross-section of the market with a diversified portfolio of private investments.
When it comes to investing, there is no one-size-fits-all approach. Each investor has different goals and risk tolerances, which means that the best investment strategy for one person may not be the best for another.
The risk-return profile is one of the most important considerations when choosing an investment strategy. This refers to the potential return of an investment compared to the amount of risk involved.
Generally speaking, investments with a higher potential return also come with a higher level of risk. This means there is a greater chance that the investment will lose money.
However, it is essential to remember that even high-risk investments can be profitable if managed correctly. And even low-risk investments can lose money if they are not appropriately managed. Finding an appropriate investment strategy for your goals and risk tolerance is critical.
One of the best ways to manage risk is to diversify your investments. This means spreading your money across different asset classes, sectors, and geographical regions.
Diversifying your investments makes you less likely to lose money if one asset class or market sector performs poorly.
For example, if you invest all of your money in the stock market and the stock market crashes, you could lose a significant amount of money. But, if you diversify your investment portfolio to include other asset classes such as bonds and real estate, you’re likely to fare better.
That said, diversification can have its drawbacks. For example, by spreading your money across different asset classes during a bull market in a specific asset class, you may not achieve the same level of return as you would if you had invested all of your money in just that one asset class.
However, diversification is a vital part of successful long-term investing. It is more important to ensure that your investments are well diversified than to achieve the highest possible return.
One way to diversify your investments is to invest in index funds. Index funds are investment funds that track a particular basket of securities, such as the S&P 500 index.
By investing in an index fund, you are effectively investing in all of the companies that make up that index. This provides instant diversification and can help reduce your investment portfolio’s overall risk.
For instance, Gridline’s Late Stage Venture Index 1 fund provides exposure to a basket of late-stage venture capital funds, which may be less risky than investing in a single early-stage venture capital fund. Meanwhile, Gridline’s Early Stage Venture Index 1 fund provides diversified exposure to early-stage venture capital funds.
Investors can also target specific geographical regions, such as Gridline’s Early Stage Venture Index – Northeast fund, which focuses on investing in Northeast venture capital funds.
Ultimately, the risk-return tradeoff is a personal decision that each investor must make. There is no right or wrong answer, and what is best for one person may not be best for another.
However, diversification is a vital part of successful long-term investing. By spreading your money across different asset classes, sectors, and geographical regions, you can help to reduce the overall risk of your investment portfolio.
Making an informed decision about the risk-return tradeoff is critical to success as an investor. This requires access to high-quality, professionally managed funds at minimums that let investors build diversified portfolios of private market assets. Gridline provides such access and is the most efficient way to gain diversified exposure to non-public assets with low capital minimums, transparent fees, and greater liquidity.
Average investors consistently earn below-average market returns. Why? Mainly because they don’t know how to build wealth.
Instead of a long-term view, they focus on the short-term, chasing performance without an understanding of how to diversify their risks appropriately. They don’t take an active role in managing their assets or think about how to generate operational alpha. And as a result, they end up with less resilient portfolios with poorer long-term returns.
Not only that, but the investment landscape has become more challenging in recent years. Flat to negative yields, rampant inflation, and the likelihood of a 60/40 portfolio returning just 3% means that average investors have to become savvier about building wealth.
Fortunately, there are some tried and tested ways individuals can build wealth, even in these challenging times. The CAIA Association has outlined five marks of effective investing:
Diversifying your portfolio across different asset classes, geographies, sectors, and purposes is one of the best ways to mitigate risk and build wealth over the long term. Investing in a diversified mix of assets can weather market volatility and shocks better than if you had all your eggs in one basket.
And with the current low-interest-rate environment, there are plenty of opportunities for diversification outside traditional investments like stocks and bonds. For example, you could consider investing in alternative assets such as private equity, venture capital, and commodities.
Some alternative asset classes, like venture capital, have low or even negative correlations with public markets, which can help diversify your portfolio and smooth out returns. Private markets have outperformed public markets in the long run, with 90% of LPs saying that private equity will continue to outperform public markets in the coming years.
This is of particular importance given the current state of the economy. We’re amidst a long bull market, and many experts predict a recession in the next few years. If that happens, private equity will likely outperform public markets again, as it did during the last two recessions.
As a Cliffwater examination of PE investments in 16 years (encompassing two bear and two bull markets) shows, PE outperformed public equities by 440 basis points annually on average. And another analysis of median net IRRs of U.S. buyout funds confirms private equity’s outperformance during economic downturns.
So if you’re looking to protect and grow your wealth in the future, investing in private equity is smart.
It’s important to remember that not all asset classes are created equal. In recent years, private markets have outperformed public markets and become an increasingly attractive option for long-term wealth building.
The numbers show tremendous potential in private equity. A recent study by Hamilton Lane found that private equity funds generated an extra 83 cents on average per dollar invested since 2017. That’s a significant outperformance compared to the public markets. Not only that, but the study found that over the past 12 years, the majority of private equity funds have outperformed their public market equivalents.
This is another reason to consider allocating a portion of your investment portfolio to private equity. With its ability to generate solid returns and provide downside protection, private equity can be a powerful tool for long-term wealth creation.
One reason is that private companies are typically less exposed to market volatility than public companies. They also offer the potential for higher returns since you get a piece of the company’s growth instead of just the dividends or interest payments on its debt.
Of course, investing in private companies is generally more illiquid than investing in public companies. That means you must be prepared to commit your capital for the long term – at least five to seven years – to see any real return on your investment. But if you’re patient and can stomach short-term volatility, a heavier weighting towards private markets can pay off handsomely over time.
When it comes to wealth building, having a fiduciary mindset is essential. That means always putting your financial interests first and making decisions based on what’s best for you, not what’s best for the person selling you an investment product.
A lot of so-called “financial advisors” are salespeople in disguise. They’re more interested in making a commission off you than in helping you build wealth. So be sure to find a fee-only financial advisor legally bound to act in your best interest. This way, you can rest assured that the advice you’re getting is genuinely in your best interest – not theirs.
In today’s world, investing your money and hoping for the best is not enough. You need to actively manage your assets and engage with the companies you invest in.
This is especially important regarding sustainability factors like carbon footprint and progress on diversity, equity, and inclusion (DEI). More and more institutional investors are starting to integrate sustainability considerations into their investment decision-making process, and as an individual investor, you should too.
Amidst more significant concerns around climate change and social inequality, investors are increasingly looking for opportunities to invest in companies making a positive impact on the world. A recent study by Gartner found that 85% of institutional investors consider ESG factors when making investment decisions.
According to Reuters, this trend is borne out in the numbers: inflows into ESG funds reached a record $649 billion in 2021 (excluding December). And there’s a good reason for this – companies with firm ESG profiles are more competitive than their peers.
Don’t fall behind – integrate sustainability considerations into your investment process today. It’s not only the right thing to do but will also put you ahead of the curve in terms of identifying leading companies that are primed for success in the years to come.
One of the best ways to generate wealth is to focus on generating operational alpha. That means using big data and cutting-edge technology to support functions like risk management and operations.
By taking an active role in managing your assets and using data-driven insights to improve your investment strategy, you can add real value to your portfolio. And that value will compound over time, helping you build substantial wealth over the long term.
Suppose you’re looking for an efficient way to gain diversified exposure to non-public assets with low capital minimums, lower fees, and greater liquidity. In that case, Gridline is a digital wealth platform that’s worth considering. Gridline provides access to a curated selection of professionally managed alternative investment funds, letting investors and advisors build diversified portfolios of private market assets.
In mid-2000, Enron’s shares were worth $90.75, falling to $0.26 prior to declaring bankruptcy on December 2nd, 2001. Enron is the largest corporate bankruptcy in US history, and much of its debt was issued through special purpose vehicles (SPVs). SPVs are entities set up for a specific purpose, usually to hold and manage assets or to issue debt. Enron used SPVs to keep debt off of their balance sheet and to create a complex web of financial deals that eventually led to their downfall.
While SPVs can be used for legitimate purposes, they also present a number of risks. Beyond the opacity and lack of stringent regulation of SPVs, there is also the risk that investors may not fully understand the risks associated with investing in an SPV. SPVs provide greater access to deals for investors, but they also tend to lack focus on the underlying investments and their potential outcomes.
In recent years, the Securities and Exchange Commission (SEC) has relaxed rules around crowdfunding and alternative investing. This has created opportunities for smaller investors to access a wider range of investment opportunities.
More recently, on August 26th, 2020, the SEC adopted amendments to the definition of “accredited investor.” The new definition includes additional categories of natural persons and entities that may qualify as accredited investors. This change expands the pool of potential investors in certain private placements.
Further, since the 2012 JOBS Act, startups have been permitted to more easily raise capital through crowdfunding. This has created a new avenue for small businesses to raise money from a large pool of small investors. The 2015 Regulation Crowdfunding (Reg CF) set the rules for how issuers could raise money through crowdfunding.
And changes made in 2020, that took effect in 2021, made it possible for startups to raise up to $5 million through crowdfunding in a 12-month period, up from the previous limit of $1 million.
These relaxed rules around accredited investors and crowdfunding present both opportunities and risks. On the one hand, they provide greater access to capital for small businesses and startup companies. On the other hand, they also open up the possibility of fraud and abuse.
The risks associated with SPVs were highlighted during the Enron scandal, but they extend into the modern investment landscape as well.
SPVs can bundle together any type of investment opportunity, including those that may be high risk or have little oversight. This can lead to investors taking on more risk than they may be aware of or comfortable with. Even if the underlying investments are not successful, fund managers may still make money from management fees, but lose nothing if the investments fail.
Ironically, the result of relaxed regulations is that the smallest investors may be paired with the riskiest deals. While public companies must meet a number of requirements in order to be listed, and VC-backed deals go through an enhanced governance process, there is no such requirement for SPVs. This lack of oversight can create an environment ripe for fraud and abuse.
Not only that, but it’s vital to trust experts when it comes to allocating capital. For example, an experienced venture capitalist will have a network of deal flow, access to better information, and more negotiating power than the average person. However, with the rise of SPVs, anyone can now bundle together any type of investment opportunity and market it to investors.
Gridline makes it easy to access proven experts and top-quartile private market alternative investments. We provide high-quality, professionally managed funds at minimums that let investors and their advisors build diversified portfolios of private market assets.
Alternative investments are all asset classes outside the traditional stocks, bonds, and currencies. That leaves an incredibly broad range of asset types to consider, including venture capital, private equity, real estate, and cryptocurrency, each of which has various sub-categories.
The key to successful alternative investing is to find high-quality assets that fit your investment goals and objectives. Once you’ve done that, you need to develop a strategy for how you’ll allocate your capital across different asset types.
And finally, it’s important to remember that alternative investments should only make up a small portion of your overall portfolio. They should be viewed as a way to diversify your holdings and reduce overall risk.
Diversification is a key tenet of investing, and alternative investments offer a powerful way to achieve it. Investing in a wide range of asset types can minimize your exposure to any particular risk.
For example, let’s say you have a heavily invested portfolio in the stock market. If the stock market were to experience a sharp decline, your portfolio would also likely take a hit.
But if you diversify with alternative investments, you can offset some potential losses you might incur in the stock market. For instance, if you invest in real estate, you’ll likely benefit from stability and growth in the value of your properties even if the stock market declines. For example, if you’re worried about a potential decline in the stock market, you could invest in cryptocurrency, which has a relatively uncorrelated relationship with traditional assets. Alternatively, investments can also hedge against downside risk in your portfolio.
The bottom line is that alternative investments offer a unique way to achieve a wide range of investment goals.
Of course, simply investing in alternative assets isn’t enough. You must also develop a strategy for allocating your capital across different asset types.
The most important thing to remember is that you shouldn’t put all your eggs in one basket. Just because you’re investing in alternative assets doesn’t mean you’re diversified.
For example, let’s say you invest all your money in real estate. While real estate can be a great investment, it’s still subject to market fluctuations. So, your entire portfolio will be impacted if the real estate market declines.
To properly diversify your portfolio, you must allocate your capital across various asset types. If one asset class experiences a downturn, your other holdings will offset some losses.
A well-diversified portfolio should include a mix of traditional and alternative investments, including private markets. For the average individual investor, accessing top-tier, actively-managed funds can be difficult due to high minimum investment requirements.
However, with a Gridline Thematic Portfolio product, you can invest 5-10 institutional-grade funds for just $100,000. This allows you to build a more diversified, resilient portfolio focused on long-term wealth creation. Additionally, by actively engaging with your assets, you can generate operational alpha and improve risk management.
The takeaway is that you need to have a strategy for allocating your capital across different asset types. Without a plan, you’re simply guessing, a recipe for disaster. With the right strategy and a high-quality selection of alternative investments, you can build a diversified portfolio that will help you achieve your financial goals.
In 2020, TechCrunch reported that Softbank expected $24 billion in losses from its Vision Fund, founded in 2017, saying that founder Masayoshi Son “was too enamored of the mythology he’d created around himself as a maverick and a visionary.”
These harsh words aged poorly, as the following year, Softbank landed the biggest profit in the history of a Japanese company—over $45 billion in group net profit year-over-year, topping even the profit made by Warren Buffet’s Berkshire Hathaway.
What happened? In a word, the J-Curve.
In finance, the J-Curve is the graphical representation of how an investment’s short-term performance can belie its long-term potential. Simply put, the J-Curve is the time it can take for an investment to show returns.
In the case of Softbank’s Vision Fund, the initial losses were quickly overshadowed by the fund’s eventual profitability. And while it’s still too early to declare the Vision Fund a complete success, the early returns are certainly encouraging.
Of course, not all investments follow such a smooth path to profitability. For many, the road to the J-Curve ends before the growth phase. But the rewards can be immense for those with the patience and fortitude to weather the storm.
Investors in a private equity fund may find themselves in the position of having committed capital to a fund with a 10-year holding period. At the end of that holding period, the fund can be liquidated and the proceeds distributed to the investors.
However, the fund’s investors don’t necessarily have to wait 10 years to reap the rewards of their investment. Instead, they can choose to exit the investment early through a process known as a secondary market sale.
A secondary market sale is when an investor sells interest in a private equity fund to another investor, ideally at a price above the original investment. Of course, selling on the secondary market is not without risk. By selling early, an investor gives up the potential upside of the J-Curve.
Softbank’s Vision Fund is a perfect example of that potential upside. Had investors in the fund sold on the secondary market after the initial losses were reported, they would have missed out on the fund’s eventual profitability. The key, then, is to find an investment with the potential to follow the J-Curve and to have the patience and fortitude to hold on to that investment for the long term.
Entire volumes have been written about the J-Curve and its implications for investors. But the phenomenon is not limited to private equity and venture capital. The J-Curve can be seen in all sorts of areas, from trade balances to the path of nations from authoritarianism to democracy.
Investors would do well to keep the J-Curve in mind when making any investment. Even the most unlikely investment can eventually follow the J-Curve to profitability with a long enough holding period.
There are several ways to take advantage of the J-Curve. One is to invest in actively managed funds, which typically require a minimum investment of $500,000 per fund. For the average investor, this is out of reach. However, another way to gain exposure to these top-tier funds is through a Gridline Thematic Portfolio product, which allows you to invest in 5-10 institutional-grade funds for a minimum investment of just $100,000.
With Gridline, you can get the same exposure to top-performing actively managed funds as the large endowments, but at a fraction of the cost. This ideal way to take advantage of the J-Curve and potentially achieve outsized wealth creation.
The much-anticipated shift from the internet as we know it to a new decentralized web, often referred to as Web3, is underway. And while it’s still early days, investors already have several ways to get involved in this exciting new space.
So, what is Web3? Simply put, it’s a new, decentralized way of storing and exchanging data and value that is not controlled by any central authority. This new web is powered by blockchain technology, which enables a wide range of new applications and services that were not possible before.
Importantly, Web3 is not just a new way of doing things – it’s a wholesale shift in how the internet works. This shift can upend many industries and create a new wave of winners and losers. For investors, understanding Web3 is critical to making informed investment decisions in this space.
There are several ways to invest in Web3. The most direct way is to invest in blockchain-based projects and companies building the infrastructure for this new web. These include projects like Patientory, Elliptic, and Passfort, which work to create a decentralized infrastructure for the new web.
Another layer of investment opportunity is found in the applications of this new infrastructure. These firms are building applications and services on this new decentralized web. Some examples include Aave, Celsius, Uniswap, and OpenSea.
Finally, investors can also invest in more traditional companies that are beginning to embrace and integrate blockchain technology into their business models. These incumbents are looking to benefit from the shift to Web3. Some examples of incumbents include Microsoft, IBM, and JP Morgan.
Beyond investing directly in blockchain projects, blockchain-focused investment funds are another way to gain exposure to this space. These funds invest in various projects and companies in the blockchain space and provide investors with a more diversified way to gain exposure to this nascent industry.
These reduce risk by diversifying investments and offer the potential for higher returns by investing in various projects across the space. Some notable blockchain funds include 3AC, a16z, and Alameda Research.
Suppose you’re looking to take advantage of the growing opportunity in blockchain investing but don’t have many institutional funds’ sizeable minimum investment requirements. In that case, a Gridline Thematic Portfolio product may be a good option. These products invest in a basket of 5 to 10 institutional-grade blockchain funds, making it more accessible for the average investor. Instead of the traditional $500,000 minimum investment per fund, you can get started with as little as $100,000 across an entire basket of funds.
These private funds tend to be restricted to accredited investors, but there are several ways retail investors can get exposure to this space. For example, the Amplify Transformation Data Sharing ETF (BLOK) invests in a basket of companies building the infrastructure for Web3.
Even now, ETFs are focused on cryptocurrencies rather than just blockchain companies. The ProShares Bitcoin Strategy ETF became the first cryptocurrency ETF when it was approved by the SEC in October 2019. This ETF holds different Bitcoin futures contracts.
To be sure, investing in Web3 is not without risk. This is a highly volatile and speculative space, and there are no guarantees that any particular project or company will be successful. Investors should be prepared for wild price swings and only invest money they are comfortable losing.
That said, the potential rewards in this space are massive, and those who can identify the winners early on could see life-changing returns. Web3 is an exciting and potentially very lucrative investment opportunity for those willing to stomach the risk.
It’s no secret that the stock market has been volatile lately. But despite the roller coaster ride, there’s one group of investors who have been sticking to their strategy and reaping the rewards: long-term holders.
While it’s natural to feel jittery when the markets are in flux, research shows that a long-term investment horizon is one of the best ways to weather market volatility. In fact, a study by Shroders found that over the last century, there hasn’t been a single 20-year period with negative inflation-adjusted returns.
It’s important to remember that market volatility is normal and should be expected. Over the short-term, markets can be notoriously difficult to predict. But over the long-term, they tend to move in predictable patterns.
This is because a longer holding period gives you a better chance of capturing the full market cycle. By staying invested through thick and thin, you’re more likely to buy low and sell high, which is the key to successful investing.
For instance, after a decline of 20% from December 2019 to March 2020 due to the COVID-19 pandemic, the US stock market rebounded and reached new highs. This is just one example, but the findings hold true across time periods and asset classes. A Morningstar analysis of eight market crashes since 1870 clearly highlights that every crash has resulted in a subsequent market recovery.
Long-term investing icon Warren Buffet famously quipped, “compound interest is the eighth wonder of the world.” And there’s a good reason for that.
The power of compounding is one of the most important drivers of success for long-term investors. When you reinvest your earnings, you’re able to compound your returns over time, which has a hugely positive effect on your overall performance.
However, pulling money out of the market during volatile periods can have the opposite effect. By selling when the markets are down, you can miss out on the eventual rebound and end up with lower returns.
Selling during a crash has been likened to “catching a falling knife.” It’s often difficult to time the market perfectly, and you can end up getting cut if you sell at the wrong time. A Massachusetts Institute of Technology study revealed that older men are more likely to panic sell during a market crash, but this older demographic is precisely the group that should be staying the course. With fewer years remaining for compounding to work its magic, they can ill-afford to miss out on the market rebound.
Not only does compounding help you grow your wealth over time, but it can also offer some significant tax advantages.
If you hold an investment for more than 12 months, you’ll qualify for the long-term capital gains tax rate, which is currently 15% for most taxpayers, although it ranges from 0% to 20%, depending on income. This is significantly lower than the short-term capital gains rate of up to 37%.
In addition, if you’re investing in a long-term, qualified retirement account such as a 401(k) or IRA, your money will grow tax-deferred. That means you won’t have to pay taxes on your investment gains until you withdraw the money in retirement. Panic selling before retirement and incurring a hefty tax bill is a mistake that many investors make.
While market volatility can be unnerving, it’s important to remember that it’s a normal part of the investing process. By staying invested and taking advantage of compounding, you can weather the ups and downs and come out ahead in the long run.
Gridline can help. Gridline is a digital wealth platform that provides a curated selection of professionally managed alternative investment funds and enables access for individual investors, and their advisors, to gain diversified exposure to non-public assets with lower capital minimums, lower fees and greater liquidity.
So if you’re looking for a long-term investment strategy that can help you weather market volatility and grow your wealth over time, Gridline is worth a look.