Self-directed investors who are building wealth by investing in assets, with which they’re familiar, such as real estate, tax liens or promissory notes, often wonder why only 2 percent of Americans are using this strategy. The answer could lie in a recent survey.
In the survey conducted of financial advisors by Jackson National Life Insurance Company, 42 percent of the respondents said they had no idea what constitutes an alternative investment. The results, published in Financial Advisor magazine
, could indicate why so few people know about the profit potential of alternative investments: because it confuses the advisors who would recommend the strategy to their clients.
The primary reason 24 percent of respondents said they don’t use alternative investments in their portfolios is because “they are unsafe/risky investments,” 21 percent answered “what is an alternative investment?” and 18 percent said “I don’t understand them, they are too complex.”
Ironically, this might be an area where some clients could be more knowledgeable than their advisors. Many investors who self-direct their IRAs have a background in real estate or other investment type, so they’re aware of the potential power of alternative investments and are comfortable using their retirement savings to invest outside the realm of stocks and bonds.
Those who want to educate their advisors about this little-known strategy and clear up confusion about alternatives once and for all can direct them to the resources available from Equity University.