Alternative investments have moved from niche corners of finance into mainstream conversation over the past decade. In the latest episode of Dime After Dime, host Anthony Stich sat down with Don Drury, President of Moran Wealth Management®, to unpack what alternatives are, why they matter, and how investors can approach them thoughtfully within a diversified portfolio
Understanding Alternatives
Unlike stocks and bonds that trade openly on public markets, alternatives involve private opportunities such as private equity, real estate, or hedge funds. Don notes that while there are roughly 58,000 publicly traded securities worldwide, the U.S. alone has more than 33 million private businesses — a vast pool of potential investment opportunities. For many, this means access to parts of the economy that were once out of reach.
The Case for Alternatives
Investors often look to alternatives for two main reasons:
- Return Potential: Alternatives can offer a premium for accepting reduced liquidity.
- Diversification: Because they are priced differently from public markets, they may provide insulation from headline-driven volatility.
This ability to behave differently from traditional assets makes them particularly appealing to high-net-worth investors and institutions seeking portfolio stability.
Correlation, Liquidity, and Investor Discipline
A central theme in the discussion was correlation — how assets move in relation to one another. Public markets are influenced heavily by global events, while alternatives tend to be priced on fundamentals, creating a stabilizing effect.
Liquidity, however, is the trade-off. Alternatives cannot be sold as quickly as public securities. Don reframes this challenge: illiquidity can actually help protect investors from emotional decisions, forcing a longer-term perspective. Still, planning for cash needs is critical.
Risks and Considerations
Like any investment, alternatives carry risks. They can involve complex fee structures, tax reporting challenges, and, in many cases, regulatory requirements for accredited investors. These factors make education and preparation essential before committing capital.
Sizing and Strategy
How much of a portfolio should be allocated to alternatives? Don suggests that many investors land in the 5–20% range, depending on goals and risk tolerance. He also stresses the importance of “vintage diversification” — spreading commitments across different time periods to avoid concentrating investments in potentially overvalued markets.
Lessons and Takeaways
Several themes emerge from the conversation:
- Alternatives expand investment opportunities far beyond public securities.
- They offer potential benefits, but demand patience with liquidity constraints.
- Diversification and careful allocation matter — especially when building resilience.
- Illiquidity, while restrictive, can serve as a safeguard against rash decisions.
- Strategic sizing and pacing investments over time can help balance risk and reward.
Final Thoughts
Alternatives are not a one-size-fits-all solution. They are complex, sometimes opaque, and always require careful planning. For the right investor, however, they can complement a portfolio by adding diversification, stability, and potential for meaningful returns.
Can alternatives complement your portfolio? Reach out to a Moran Wealth advisor to find out how. Contact – Moran Wealth Management.