JPMorgan dropped a bombshell report on the investment world.
It said: The average investor has made just a puny 3.6% per year for the last couple of decades. Factoring in inflation, the typical investor has made real returns closer to zero in most cases.
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This is while the stock market returned over 9% annually over the same time. Even this year, things are not much different. If investors own the “Magnificent 7” stocks, their returns are close to zero again. Meanwhile, the S&P 500 is up about 13% in 2023.
So, why does the everyday investor perform so poorly?
Wall Street Stunned by Returns
A lack of diversification is being cited as the main culprit in most investors’ portfolios. And the main reason some experts believe the 60/40 portfolio is on its deathbed.
In a changeabout, more and more institutions are moving toward “alternatives.”
Learn more about alternative investments
In fact, BlackRock, the world’s largest asset manager, recently proclaimed that “a 50/30/20 portfolio is the new 60/40.” Meaning, take 10% from stocks and 10% from bonds and move it to alternative assets.
The stats back up heavy allocation to alternatives.
Over time, alternatives have shown the ability to lower volatility, reduce correlation, and most key: increase returns in a well-diversified portfolio.
Learn more about how investing in art could hedge against inflation
That’s especially the case with contemporary art.
Contemporary art prices have outpaced the returns of traditional assets (stocks and bonds) and other popular alternatives (real estate, gold, and hedge funds) for decades accessing this market required millions of dollars.
But when it came to translating that market growth into actual returns, retail investors were out of luck for generations due to an opaque market and high barrier to entry. Until everyday investors began netting annualized returns of 10.4%, 13.9%, 17.8%, 21.5%, 33.1%, and 35.0%, among others.
While bonds continue to slump, and the “Magnificent Seven” are propping up the S&P 500, alternative markets continue to see inflows that speak to newer trends among investors.
This article originally appeared on Masterworks.com and was syndicated by MediaFeed.org.
JP Morgan does not endorse Masterworks and are not currently clients/advisors. Past performance is not indicative of future returns. Investing involves risk. Important Regulation A disclosures at masterworks.com/cd.
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