What to do in times of market volatility

As Einstein often said, doing the same thing in exactly the same way and expecting different results is the very definition of insanity. Investing can feel a lot like that too. Part of us wants to stay put and ride out the storm during times of market volatility, but part of us wants to jump ship and row in the other direction!

The challenge with investing in the markets is that unless we consider alternatives that are not market-linked, we may simply jump from one ship to the other, whilst remaining in exactly the same stormy sea.

So here’s the challenge; what do we do in times of market volatility?

We recently read a blog from ​​PIMCO that highlighted how alternative strategies, which can have low or no correlation to traditional markets, may also offer access to an expanded set of market opportunities.

Simply put, investing in alternatives can help provide better portfolio diversification for those who can accept a potentially greater level of risk.

During times of market stress, this is especially important. This is why GreenPark Global connects investors to compelling alternative investment opportunities.

As PIMCO says on their blog, here’s how adding alternatives to a portfolio can create new opportunities:

1. Move in a different direction

It’s important to remember that there are different ways to engage with markets beyond the more traditional buying or selling of individual securities. These approaches can help buffer a portfolio when public markets are volatile.

2. Access new opportunities

Alternatives broaden the investable universe. When traditional investments seem lackluster and maybe even scary, alternatives can offer additional opportunities by tapping into specialized marketplaces beyond stocks, bonds and cash. This may include litigation finance, real estate and infrastructure (amongst others).

3. Understand the potential advantages of illiquidity

During times of market volatility, alternative strategies that are not in daily-liquidity vehicles may be less likely to be forced to sell quickly and at a lower price than their more liquid counterparts like mutual funds, which may need to raise cash to meet redemption requests from investors. At the same time, they may be positioned to take advantage of attractive buying opportunities that are discounted because of market stress and dislocations. Plus, more illiquid assets often demand higher yields from investors due to the increased risks.

If you’re familiar with the phrase “never put all your eggs in one basket”, then you’ll know that this is taking it one step further and finding hens on completely different farms, not just focussing on one source and one container.

Litigation finance offers you and your clients an exceptional opportunity to move in a different direction, access new opportunities and bolster liquidity.