How to Invest in Non-Traditional Assets: A Comprehensive Guide by Scott Tominaga

 

Scott Tominaga Shares A Guide to Investing in Non-Traditional Assets

Scott Tominaga points out that investing in non-traditional assets can offer unique opportunities to diversify your portfolio, hedge against market volatility, and potentially achieve higher returns. However, venturing beyond the familiar realms of stocks, bonds, and mutual funds requires a different set of skills, knowledge, and considerations. This comprehensive guide will walk you through the essential steps and strategies for successfully investing in non-traditional assets.

Understanding Non-Traditional Assets

Non-traditional assets, often referred to as alternative investments, include a wide range of investment vehicles that fall outside the conventional stock and bond markets. These can include real estate, private equity, hedge funds, commodities, art, collectibles, and even cryptocurrencies. Each of these asset classes has its own set of risks, rewards, and complexities.

Benefits of Investing in Non-Traditional Assets

One of the primary reasons investors turn to non-traditional assets is to diversify their portfolios. Traditional assets like stocks and bonds tend to be correlated with market movements, meaning they often rise and fall together. Non-traditional assets, on the other hand, may offer a lower correlation with the broader market, providing a potential hedge against volatility.

Additionally, some non-traditional investments, such as real estate or private equity, can offer the potential for higher returns compared to traditional assets. They also provide opportunities to invest in areas you're passionate about, like art or collectibles, which can add a personal dimension to your investment strategy.

Key Considerations Before Investing

While the potential benefits are compelling, investing in non-traditional assets also comes with certain challenges. Before diving in, consider the following factors:

1. Liquidity: Many non-traditional assets, such as real estate or private equity, are less liquid than stocks and bonds. This means it can be harder to sell these assets quickly if you need to access your funds.

2. Valuation: Determining the value of non-traditional assets can be more complex. Unlike publicly traded stocks, which have clear market prices, assets like art or collectibles may require specialized knowledge or appraisals to determine their worth.

3. Regulation and Transparency: Non-traditional investments are often less regulated than traditional ones. This can mean fewer investor protections and more reliance on the integrity of those managing the investment.

4. Risk: Non-traditional assets can be riskier due to factors like market volatility, lack of regulation, and illiquidity. It's essential to assess your risk tolerance and ensure these investments align with your overall financial goals.

Strategies for Investing in Non-Traditional Assets

1. Do Your Research: Thoroughly research any non-traditional asset you're considering. Understand the market, the risks, and the potential rewards. If you're investing in something like art or collectibles, consider working with experts who can provide valuable insights.

2. Start Small: If you're new to non-traditional assets, start with a small allocation of your portfolio. This allows you to gain experience and understand the dynamics of these investments without overexposing yourself to risk.

3. Diversify: Just as with traditional investments, diversification is key. Consider spreading your investments across different types of non-traditional assets to reduce risk.

4. Seek Professional Advice: Given the complexity of non-traditional assets, it may be wise to consult with a financial advisor who has experience in this area. They can help you navigate the nuances and make informed decisions.

Investing in non-traditional assets can be a rewarding way to diversify your portfolio and explore new opportunities. However, it requires careful consideration, research, and a clear understanding of the risks involved. Scott Tominaga mentions that by following the strategies outlined in this guide, you can approach non-traditional investments with confidence and make informed decisions that align with your financial goals.

Scott Tominaga: Investing with Margin of Safety

 

Scott Tominaga on Understanding Margin of Safety

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The margin of safety in investing is crucial. It represents the percentage variance between a stock's intrinsic value and its current market price. A wider margin of safety provides a cushion against potential errors in optimistic valuation assumptions, thereby safeguarding your investment from undue risks. By carefully considering this factor, investors can enhance their chances of making sound investment decisions and protecting their capital in the volatile world of stock markets. If the current price is $7.50 per share and the intrinsic value is $10 per share, then there is a margin of safety of 25%, explains Scott Tominaga. It's worth noting that intrinsic value is not concrete. It is the sum of subjective inputs and could vary widely depending on the analyst.

The higher the margin of safety, the less risk in your investment. Theoretically, a stock with a 60% margin of safety will fall less than a stock with no margin of safety.

Understanding the margin of safety

Using the margin of safety as a guiding principle in investment decisions is a cornerstone of value investing. While this approach is commonly associated with value investing, it's interesting to note that growth investors also recognize its importance and consider the concept in their analyses.

Value investors generally use one of the methods below to find a stock's intrinsic value:

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Discounted Cash Flow (DCF): With the discounted cash flow model, you project 10 years of future cash flows, notes Scott Tominaga. You then discount the numbers because the money you have now is most probably worth more than the money you might have in the future. The intrinsic value is the sum of the projected future cash flows.

Multiples: Multiples such as price/earnings, price/book, or price/sales allow you to compare the stock with its competitors or the overall market. If the stock has a lower multiple than similar stocks or the overall market, it could have a margin of safety.

Liquidation value: The only way to value some stocks is to discount some of the assets to fair market value and determine what the whole company would go for if sold or broken up, adds Scott Tominaga.

Scott Tominaga is a professional in the hedge fund and financial services industry and is responsible for all aspects of back-office operations daily, including investor relations and marketing. Learn more about Scott and his background in investment by visiting this page.

How to pitch investment proposals like an expert

With his years of experience in a number of industries, Scott Tominaga has amassed a wealth of knowledge which he shares with readers through his series of blogs. His topics are as varied as they are helpful, and are aimed to help people make well-informed decisions when it comes to matters of investment, business, and everything in between.

Image source: startupconnection.net

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In today’s blog, Scott focuses on the all-important investment pitch. 

Before anything though, people need to know that the chance of having a pitch rejected is pretty high and that is a normal thing. However, there are ways to increase the chances of, at the very least, getting potential investors interested.

Tip 1: Be thorough, but do not be boring.

Experienced professionals will be the first to say that while delivering a pitch, never assume that potential investors know what the proposed product or service is all about. So, be thorough and cover everything. Having said that, do not bore the audience with a barrage of details. Be concise and straight to the point. Also, engage the audience. Yes, explain the idea but also talk to potential investors like they are part of the presentation.

Tip 2: Be mindful of being respectful.

Scott Tominaga explains that while being respectful and courteous is a given, some people who go through it appear arrogant without intending to be so. Whether it’s the nerves getting to them, or the fact they believe in their idea so much, or other reasons, Scott reminds everyone to keep themselves in check. Potential investors are seldom enamored by presenters who are full of themselves. Be humble.

Scott Tominaga has played primary roles in the establishment of several operational infrastructures, successfully interfacing with fund managers and professional service providers to establish efficient and transparent operations and reporting structures. For related reads, click here.

Industries to put your money this 2019

A strong growth prospect should be prime consideration for future investments in specific industries. You’re looking for industries with opportunities to expand into new markets and consistent upward sales trends. They deliver products or services that people already use or want to get their hands on, advises finance professional Scott Tominaga of PartnersAdmin LLC. Hereunder are some industries that show great potential, even as we enter the 2020s.

Image source: forbes.com

Artificial intelligence

AI research has been booming in the past few years, and the effect of AI in our society has never been more palpable as it is now. Companies like Google, IBM, and Uber are now taking advantage of the massive QoL changes AI is bringing, from developing complex games and autonomous vehicles to introducing apps and gadgets to the modern hospital.

Image source: inc.com

Financial services

Business development companies boasting direct equity investments, whether small- or medium-sized, comprise another promising industry. Even as the Federal Reserve seeks to raise interest rates, financial services are a great investment choice as such a move by the government simply means the industry is generating profit.

Healthcare

Already among the best-performing sectors in 2018, healthcare should continue to grow as an investment option in the coming years. This industry is one of the most solid investment options out there, even as advancements in Big Data, Machine Learning, and the Internet of Medical Things (IoMT) are being deployed.

Telecommunications

Investors in telecommunications should avoid stocks with high price-earnings ratios and instead look at firms with lower debt, advises Scott Tominaga. A shake-up in the industry has relegated tech giants like Netflix and Facebook to the revamped sector, so it’s recommended that investors look to more traditional and conservatively managed telecommunication companies instead.

PartnersAdmin LLC’s Chief Operating Officer Scott Tominaga has nearly two decades of experience in the hedge fund and financial services industry. He is an expert in middle and back office, accounting, compliance, and administrative work. Visit this blog for related posts.