Is this time different?

Anyone that pays attention to fintech will know that there has been a meteoric rise in startups bringing alternative investments to retail investors. These alternative asset classes can range anywhere from simple active managed portfolios to the masses all the way to Robinhood for investing in art.

It’s been fascinating to watch as these startups are suddenly allowing retail investors the chance to invest in fractional pieces of art, wine, hand bags, or providing them access to actively managed funds in both equity and real estate. I’m generally a fan of these startups. It’s fun to invest in different asset classes and I’d argue that a lot of portfolios deserve an allocation in these different alternative investments.

One observation that is consistent and somewhat scary is that many of these alternative investment platforms are claiming alpha, i.e. returns that are beating the market right now.

On the surface, 2-3 years of beating the market may look a no brainer to invest, but in reality you don’t judge a fund’s performance based off 2-3 years. The real truth comes over time. Can this fund or investment actually out perform the market over a sustained period of time like 10 years?

History will tell us no. Most hedge funds underperform the market even before fees. History will say that you likely will be better off just investing in the S&P 500. It’s hard to argue with data.

So is this time really different? I have no idea.

I do know one thing and that’s tech is growing at an unprecedented rate which is enabling gains previously unattainable in the past. You can grow a company much faster today than you could 10 years ago simply due to tech advances. Blockchain and crypto is something that obviously didn’t exist over the last 50 years.

We may very well be on a new uncharted path. Maybe this time will be different or maybe history will show that everything will continue back to normal over the long run.

I wouldn’t bet my life savings on either, but I got a feeling that things are going to be slightly different this time around. While I wait to see what happens, I’m going to continue to diversify and ensure I make smart bets that can allow me to participate if this time is truly different, but be safe if things are not.