Alternative Investments

Bluebird Advisory offers access to a curated range of alternative investments –
helping clients in Boulder, Colorado diversify their portfolios beyond traditional markets.

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Why Invest in Alternative Investments?

At BlueBird Advisory, I bring together leading professionals to offer clients a diverse range of alternative investments. Our expertise and resources are available whether you want to diversify, enhance returns, or protect your wealth. We believe in the power of partnerships and are here to guide you every step of the way.

Why alternative investments matter:

Diversification is critical in today’s volatile market. Alternative investments can help reduce risk, protect against inflation, and provide access to opportunities beyond traditional stocks and bonds.

What Are Alternative Investments?

Alternative investments are financial assets outside conventional investments like stocks, bonds, and cash. These investments include assets and strategies such as Bitcoin, real estate, private credit, etc.

Key benefits of alternative investments:

Portfolio Diversification: Alternative investments offer exposure to assets with low correlation to traditional markets. This means that when traditional markets perform poorly, these alternative assets may perform better, reducing overall portfolio risk. 'Low correlation' refers to the tendency of these assets to move in different directions from traditional stocks and bonds, providing a hedge against market downturns.
Potential for Enhanced Returns: Many alternatives are designed to generate higher returns, especially in low-yield environments. This potential for significant growth can be a source of optimism for investors.
Inflation Hedge: Older investors can pass assets to their children with a step-up in cost basis, eliminating capital gains taxes for heirs.
Inflation Hedge: Assets like real estate and commodities help protect against inflation.
Tax Advantages: Many alternative investments offer significant tax benefits. Savvy investors must understand and utilize the tax code to secure their financial future.
Access to Unique Opportunities: These investments may provide access to markets and strategies unavailable through public securities. For example, private equity can give you a stake in high-growth companies before they go public, while private credit can offer lending opportunities not available in public bond markets.

Types of Alternative Investments

Bitcoin

Bitcoin is the most recognized cryptocurrency, but it’s more than just digital currency. Bitcoin is the most significant non-state-based money globally, with a market value exceeding a trillion dollars. Its primary use case today is as a store of value.

Pros:

High Return Potential: Bitcoin has shown significant appreciation, offering the potential for substantial gains.
Liquidity: Bitcoin is highly liquid, with 24/7 trading on global platforms. $20-$40 billion of Bitcoin trades daily as of 2024 versus about $120-$150 billion of gold. The gold market is about $12 trillion, about 10x the value of the Bitcoin network, and most likely, Bitcoin will continue taking market share from gold and other monetary stores of value.

Cons:

Why Bitcoin stands out:

Finite Supply: Bitcoin’s supply is limited to 21 million coins, making it inherently scarce. This scarcity, now even more scarce than gold, drives its value and potential for substantial appreciation.
Global Accessibility: Bitcoin is accessible anywhere globally, transcending traditional financial systems.
Strong Network Effects: Bitcoin benefits from network effects and growing adoption curves like other groundbreaking technologies. The more it’s adopted, the stronger its value proposition.
Alternative to Fiat Currency: Bitcoin competes with government-issued currencies. Historically, political leaders' excessive money printing to gain and maintain power has led to currency devaluation and inflation, harming citizens' purchasing power. Bitcoin offers a decentralized, digital alternative immune to such risks.
Long-Term Savings Mindset: Owning Bitcoin tends to encourage a long-term savings mentality, with a focus on planning for 5, 10, or even 100 years down the road. This fosters financial discipline and future-focused decision-making. Consumption takes a back seat to savings.
Decentralized Mining Network: Bitcoin's security and value are bolstered by an extensive, decentralized network of miners incentivized to enforce the protocol through the proof-of-work mechanism. As mining difficulty increases and Bitcoin rewards decrease, mining costs rise. This flywheel effect—where increasing costs drive up the value of the network and the coin—is unique to Bitcoin. Unlike traditional commodities like oil and gold, where higher prices lead to increased supply, Bitcoin is a unique commodity with a capped supply, which ensures its value rises as demand grows.

Private Real Estate

Private real estate investments include direct property ownership and investments in real estate funds. These tangible assets offer the potential for a steady income and capital appreciation.

Benefits of private real estate:

Challenges:

Private Credit

Private credit involves lending to companies or projects outside public bond markets, including direct lending, mezzanine debt, and distressed debt.

Why consider private credit:

Potential drawbacks:

Private Equity

Private equity involves investing in private companies or taking public companies private. This can include venture capital, growth equity, or leveraged buyouts.

Advantages of private equity:

High Return Potential: Private equity offers significant upside through operational improvements and strategic growth.
Control: Investors often have more significant influence over the companies they invest in.
Access to High-Growth Companies: Participate in the growth of companies not available in public markets.

Considerations:

Oil and Gas Drilling Funds

Oil and gas drilling funds involve providing capital for energy exploration and production. These investments offer unique tax benefits and can hedge against energy price inflation.

Why invest in oil and gas:

Risks:

Key Considerations When Investing in Alternatives

What you need to know:

Thorough Research: Understand the investment strategy and the manager’s track record.
Liquidity Terms: Determine how long your capital will be tied up.
Fees: Be aware of fees, which can significantly impact returns.
Tax Planning: Use the tax code effectively to maximize the benefits of alternative investments.
Goal Alignment: Ensure these investments fit your financial strategy and risk tolerance.

The Bottom Line on Alternative Investments

Alternative investments offer valuable opportunities for portfolio diversification, enhanced returns, and inflation protection. However, they come with risks such as illiquidity, complexity, and higher fees. These are not investments to enter without careful consideration.

At BlueBird Advisory, I partner with Secure Financial and other leading professionals to guide you through these options, ensuring they align with your financial goals and risk tolerance. With growing interest in alternative investments, now is the time to explore how they can fit into your broader investment strategy.

Ready to explore alternatives?

Let’s discuss how these investments can work for you.