Investing with Greater Security During Market Mayhem
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With the stock market now making severe ups and downs, investors should re-evaluate their portfolio strategies, especially to ensure their investments are protected from today’s volatility and the rockiness that could last for quite a while.
Investors have many diversifying strategies, like buying stocks in different sectors, but they may not be enough in today’s unpredictable environment. Now, most stocks are affected by broader market swings and very few are immune from these larger trends.
Increasingly, one answer to balancing the forces of outside turmoil is to turn to alternative investment choices that have little to no correlation with the ups and downs of stocks and bonds. Having more balance in your portfolio by including alternative investments, can help to provide more stability, which is crucial to lower-risk income investing.
How Today’s Markets Are Alarming Investors
It’s no secret that today’s uncertainty in the markets is rooted in the panic over the COVID 19 coronavirus and the economic impact of the growing number of business closure policies trying to stem the spread of the virus.
After all, as consumers stay inside and businesses close, the system of buying and selling that fosters economic growth grinds to a halt and that can accelerate the spiraling down of a recession. Lately, stocks are on edge, eager for any sign that the economy may be able to weather this storm and continue its decade-long bull run. For example, we saw a major rally after the proposed $2 trillion economic stimulus package was approved.
But stocks soon retreated based on later news about the breadth and depth of the virus’ potential impact; only to be followed by other intraday rallies. We’ve even seen double-digit losses and gains in one day in the major indices. In one month, the Dow had its worst monthly performance since 1931 while the S&P 500 fell 30% from its record high close on Feb. 19. The Cboe Volatility Index (VIX), Wall Street’s “fear gauge” and a measure of expected volatility, has hit record levels, surpassing even those seen during the last financial crisis. On the horizon, we have additional job reports, housing market reports, earnings reports and consumer spending reports, which are all among the economic indicators that can really shake things up in either direction.
Today’s bond markets are just as turbulent. Overall, bond yields have slid as the coronavirus situation has escalated. Yields on a U.S. 2-year Treasury were about 0.33% as of March 24, down from 1.25% a month prior. The yields on a U.S. 10-year Treasury Note fell from 1.37% to 0.84% during that time.
No one knows exactly when the market will bottom – or if it already has – because stocks hit this high volatility so suddenly and they’re still finding their footing. It’s just too early for analysts and economists to call next moves with any confidence. We won’t even get a clear sense of COVID 19’s true impact until second quarter earnings reports in July. Still, many are expecting a significant contraction in the U.S. economy, so it’s a crucial time to keep your financial plan in check.
Preventing losses to your nest egg while also earning income is a challenge in any trading environment, much less one as uncertain as in today’ markets.
Financial advisors often remind their clients to make sure that decisions about money should be driven by careful planning toward financial goals, not reactionary emotions like fear and panic. You can prepare your portfolio for today’s fluctuations and volatility yet to come by developing a good defensive strategy to protect your principal.
Income investors have several ways to reduce the risk of losing their principal. They can turn to assets such as bonds, Treasuries or CDs (Certificates of Deposit), which provide either government backing or FDIC insurance. The downside to investments like these, however, is that, while they are indeed considered very low risk, their returns are not as high as you can find with other investments. For example, interest rates on a CD range from about 1% to 2%. Compare that to Wilshire’s Private Debt Funds, which target between 6% and 12%, arguably more attractive returns.
Wilshire’s Role in Today’s Market Trends
Sometimes it’s good to be on the sidelines instead of in the game. Wilshire Finance Partners’ two Private Debt Funds are designed to tap into opportunities that are not as influenced by stocks and bonds. They help investors reduce their exposure to the market while striving to provide Stable Income & Principal Protection.
Both the WFP Income Fund and the WFP Opportunity Fund, as short-term alternative fixed income investments, are not correlated to the stock or bond markets and are not interest-rate sensitive. They are designed to provide monthly or quarterly payments to investors. And for principal protection, they are secured by a hard asset – real estate. You see, these Private Debt Funds, a form of trust deed investing, are a result of pooling bridge loans originated by Wilshire Finance Partners that are secured by multifamily and commercial real estate.
The WFP Income Fund targets a 6% to 8% annualized dividend paid monthly, and the WFP Opportunity Fund targets a 12% annualized dividend paid quarterly. The WFP Opportunity Fund, which has a two-year lock up period, can benefit investors who want principal protection but may be willing to take on a bit more risk in exchange for greater potential returns. These funds give investors many of the advantages of investing in real estate, but without the responsibilities of management. Instead, the investors in the funds get many of the benefits of being the lender.
The Bottom Line
This is not an easy time to make investment decisions. Try not to panic and react emotionally with your choices. Keep your focus on your financial goals, including both your long-term and short-term needs, so you can develop a sound strategy that is right for you.
While the direction of stocks and bonds is in flux, now is an ideal time to consider how alternative investments like either the WFP Income Fund or the WFP Opportunity Fund can fit into your portfolio. Amid chaos in the broader market, Wilshire’s easy and understandable investments can offer you both greater down-side risk protection and return potential. The best way for you to invest in these funds will depend on both your financial goals and how much you prioritize higher predictable returns.
For more information about Wilshire Finance Partners’ funds, including a copy of the Private Placement Memorandum and other information about the funds, visit the Wilshire Finance Partners website at www.WilshireFP.com, email Wilshire at Investments@WilshireFP.com, or call 1-866-575-5070.
Investments in the WFP Income Fund and WFP Opportunity Fund are only available to accredited investors.
Wilshire Finance Partners, Inc. specializes in real estate finance and investments and is the manager of the WFP Income Fund, LLC (the “Income Fund”) and the WFP Opportunity Fund, LLC (the “Opportunity Fund” and collectively with the Income Fund, the “Funds”). This communication is not an offer to sell or the solicitation of offers to purchase the securities of either of the Funds or otherwise. The purpose of this communication is to provide an overview of the respective Funds and their private placement. Persons interested in learning about either of the Funds and their private placement will be provided with a Private Placement Memorandum (inclusive of exhibits thereto and any supplements, the “Memorandum”), which provides a description of the respective Fund, the terms of its private placement, a discussion of risk factors, a copy of such Fund’s limited liability company operating agreement, a subscription agreement and other information related to the respective Fund. This communication contains certain forward-looking statements regarding each of the Funds’ investment objectives and strategies. The forward-looking statements are based on current expectations that involve numerous risks and uncertainties which are difficult or impossible to predict accurately and many of which are beyond the control of Wilshire Finance Partners, as the manager of the Funds. Although Wilshire Finance Partners believes that the assumptions underlying the forward-looking statements are reasonable, any of the assumptions could prove inaccurate and, therefore, there can be no assurance that the forward-looking statements will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements, the inclusion of such information should not be regarded as a representation by Wilshire Finance Partners, any placement agent, or any other person, that the objectives and strategies of the respective Funds will be achieved. An investment in either of the Funds may be made solely by accredited investors (which for natural persons, are investors who meet certain minimum annual income or net worth threshold), who are provided with the Memorandum and who complete, execute and deliver the subscription documents included therein. Each of the Funds securities are being offered in reliance on an exemption from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”) and are not required to comply with specific disclosure requirements that apply to registration under the Securities Act. Neither the Securities Exchange Commission nor any state agency has passed upon the merits of or given its approval to the securities, the terms of the offering, or the accuracy or completeness of any offering materials. The securities are subject to legal restrictions on transfer and resale and investors should not assume they will be able to resell the securities. Past performance is not indicative of future results. Investing in the Funds involves substantial risk, including loss of investment, and is not suitable for all investors.