9ALTERNATIVE INVESTMENTS
Thus far we focused on publicly traded stocks and bonds of developed countries, primarily the United States. Although these are the most important assets for investors to consider, the number of alternative investment candidates runs into thousands. To begin, there are the major categories of alternate investments. These include the stocks and bonds of developing countries, real estate, commodities, and investments in private companies. Next there are an untold number of derivatives securities. Finally, there are more exotic investments including precious metals, jewelry, art, collectibles, and the current star of the exotic investment show – cryptocurrencies. With such a large menu of alternative assets, in any given year a few are going to do extremely well.1 The astonishing increase in the price of Bitcoin in 2017 is an example.
Aside from direct investment in alternatives, there is now a large menu of funds that hold alternative investments and offer shares or partnership interests to the public. For instance, there are exchange traded funds (ETFs) that track oil, gas, gold, and silver.
The plethora of alternatives is likely to leave most investors feeling frustrated because there will always be a fantastic performer they missed. For instance, at SMBP we have avoided investing in Bitcoin because in our view it has little fundamental value. Nonetheless, we still find ourselves saying, “What if we had bought Bitcoin when it was less than $100?” That ...