The Holy Grail of the financial world is an investment that will generate decent long-term returns, but also post gains when stocks are in a downturn. Following the Bear markets of 2000-2002 and 2007-2009 this quest has taken on increased importance in the minds of investors. They are desperately trying to find some mechanism that will protect their portfolios the next time their stock investments begin to sink.
Searching for this “fountain of growth” has encouraged investors to seriously review alternative investments. For those who are uncertain, alternative investments are items such as real estate investments, gold, and commodities, as well as mutual fund and exchange-traded funds. But, these traditional investment alternatives can also include things like investing in gemstones, other precious metals, art, bottles of wine, or even a classic automobile.
To coincide with the recent rise in popularity in these nontraditional investments, Bloomberg Markets magazine compiles an annual list of the best performing alternative investments. This past year a subset of real estate investment trusts, otherwise known as REITs, was the top earner. Self-storage operators returned 17.4 per cent a year over the past three years. These metrics performed better than the stock market; better than the bond markets; and even topped the alternative private equity markets.
Real Estate has performed better than the stock market; better than the bond markets; and even topped the private equity markets.
There are several demographic trend reasons that self-storage REITS are performing so strongly. First, home-ownership is at its lowest point in the United States in 19 years, down to 64.7 percent in the second quarter of 2014. Generally, when people own a home they have generous space to keep all of their belongings. But, in the current climate many Americans are having to turn to self-storage units to find a place for all that extra furniture, books, children’s toys, and other goods that they’ve built up over the years. The other trend pushing the rise in self-storage is that society is building a desire and need for the ability to keep our items safe in a central location in the event of significant life events such as job changes, marriages and divorces, death, etc.
Although for the most part, people looking to cash in on the most favorable alternative investments have traditionally looked to tangible items (e.g. stamps, coins, wine, antique cars), investment-seekers should consider the world’s real estate markets for opportunities that have demonstrated continued strong performance; year after year.