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How do you Assess the Relative Risk of Alternative Investments?

Started by Kwasn.mania, November 30, 2020, 02:41:38 AM

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I am creating a new investment plan for our assets but, I have one sticking point: assessing the relative risk of syndications versus traditional investments.   

I have not been able to find any meaningful information or discussion on this topic within the interwebs.  Strangely, despite glowing reviews of the many benefits of real estate investing (namely on platforms like CrowdStreet), it seems many investors still lean heavily on stocks versus alternative investments within their overall asset portfolio, and I can't determine why.  Perhaps they don't understand the relative risk of stocks versus real estate?  Perhaps they desire liquidity?  Or maybe they can't create a diversified portfolio of syndicated deals, as one can with stock index funds that would greatly mitigate one's overall risk? 

Being able to have a reasonably accurate assessment of relative risk of various investments is key (at least for me) to confidently determine how I want my resulting overall asset allocations to look today, and in the future.  While one's choice of allocations will differ with age and financial considerations, the relative risk of any given asset should be relatively stable over time.  The exception being long versus short term volatility and recovery of stocks and inflation (ie risk over a 5-year versus 25-year timeline).

To clarify, risk for me means the likelihood and severity of irrevocable capital loss over any given 5-year period. 

Where would you place investing in a reputable, vetted, and diversified real-estate based syndication fund (both growth/value-add and income type funds) along the overall spectrum of risk?   At this point in time, I am excluding distressed market classes like retail and hospitality from the umbrella group of "real estate".

I have placed asset groups as follows from lowest to greatest risk relative to each other (at this point in time, and according to my definition of risk.  Clearly relative risk will be different for different people and/or time periods). This is better in graphic form, but I don't see how to insert that...

  • Index Bond Fund (Least risk)
  • Cash
  • Syndicated Notes & Income Funds
  • Self-Owned Real Estate (this is based on my personal experience and performance, not the general public)
  • US Stocks Index Fund
  • International Stocks Index Fund
  • Syndicated Growth Funds
  • Any Individual stock/company/project (Highest Risk)
Appreciate folks' thoughts on this one!