Goldman Sachs has announced the beginning of a “New Investment Era” and has shared insights into the growing opportunities that will be available for investors. The insights from the top investment bank are contained in an asset management report titled, From TINA to TARA: Investing in the Next Cycle.
The release argues that the broad stock market had benefitted for years from a long period of low interest rates because there were few alternatives for investors to allocate their funds.
The paper contends that the TINA era, which means “There Is No Alternative,” may be taking a hiatus. It indicates that, due to the perceived lack of viable alternatives, investors are compelled to invest in particular assets. Goldman then introduces the concept of the TARA era, which stands for “There Are Reasonable Alternatives.” This phrase reflects a growing belief that investors can achieve diversification and potentially higher returns by looking beyond traditional stocks and bonds. The challenge lies in identifying these “reasonable alternatives.”
The New Investment Era
The shift from TINA thinking prompts a search for a new investment era. First, it’s important to understand the era we just lived through, especially for those who only became interested in the stock market in the last ten years. By understanding this, we can appreciate the continual evolution of markets, ensuring that opportunities persist.
The TINA mindset came to be with market conditions where investors, despite potential concerns about valuations or economic indicators, felt compelled to invest in equities because other asset classes had unattractive returns. This compulsion resulted in a self-reinforcing cycle. The demand for equities drove up equity prices, which, in turn, attracted even more investors away from their other low-performing assets.
Goldman argues investment opportunities in the new era offer a broader spectrum of opportunities, just as they did before the TINA era. Investors can again weigh the reward against the perceived risk, and the answer won’t always be “traditional stocks.”
The newly introduced concept of TARA reflects Goldman’s belief that investors can achieve diversification and potentially higher returns by looking beyond traditional stocks, or even bonds. The challenge lies in identifying these “reasonable alternatives,” and identifying how to access them.
Goldman Sachs Identifies New Alternatives
The specific asset classes highlighted by Goldman in their paper were not as accessible to the self-directed investor just a dozen years ago. For example, the ability for investors to gain access to hedge fund investments or participate in markets in India or China was much more difficult at the start of America’s long stock market bull run more than a decade ago.
In addition to newly accessible investing, old opportunities are appealing again. This is why interest rates at their new higher levels are attracting money back away from stocks. In fact, on the most secure side of the spectrum, money market fund assets just broke a record of $6.4 trillion in assets. While these relatively safe funds also compete with stocks, Goldman discussed the expectations of the TARA investment mindset, which causes investors to look at what were once obscure asset classes.
One of these more obscure opportunities that are now available on most retail trading platforms is private credit strategies and floating rate loans, which have recently become more attractive because of rising rates. Another alternative to equities is investing in commodities like gold, oil, or agricultural products. These can act as a hedge against inflation and provide additional portfolio diversification.
Investing in non-publicly traded infrastructure projects like toll roads, utilities, and renewable energy are alternatives that can offer steady returns with a lower correlation to the stock market. Real estate also has unique advantages in various segments and sectors, including both commercial and residential properties.
ETFs: Easy Access to Alternatives
The average person with a no-fee trading account now has easy access to alternative assets that were once either off-limits because of regulations, or too expensive in retail-sized positions. This changed as ETFs now cover various asset classes, including crypto and cannabis, alongside others mentioned earlier.
The attractiveness of ETFs is that they bundle together assets from a particular sector or strategy. This allows investors to gain exposure to alternative asset classes without the high investment minimums or complexities often associated with them. For instance, an “infrastructure ETF” could hold a basket of companies involved in building and maintaining roads, bridges, and other infrastructure projects.
From the asset types covered in the Goldman Sachs report, there are larger ETFs that provide investor exposure without needing to work directly with a hedge fund manager or an investment bank. A few of them will be discussed later in this article.
Expert Ratings of the ETFs
The TipRanks ETF Screener provides users with a simple “Alternatives” filter which can then be broken down into 24 other sub-categories. This allows pinpointing, with great detail, and information on expert ratings of the ETFs.
A quick scan for larger ETFs in some of the categories mentioned revealed the following:
Infrastructure ETFs that offer exposure to companies involved in the infrastructure development and maintenance of various sectors, including utilities, transportation, and energy, include the Global X U.S. Infrastructure Development ETF (PAVE) and the iShares Global Infrastructure ETF (IGF). There are also ETFs with private credit strategies. The two largest private credit ETFs are the Invesco Senior Loan ETF (BKLN) and SPDR Blackstone Senior Loan ETF (SRLN). For exposure to commodities like agriculture, there are hundreds of ETFs available. These two are the largest agricultural commodity ETFs, the Teucrium Soybean Fund (SOYB) and the Teucrium Corn Fund (CORN).
For global exposure, the iShares MSCI India ETF (INDA) offers access to a diverse range of Indian equities spanning various sectors of the economy. In addition to all economies with an active stock market, there are many ETFs that allow investors to take part in the Chinese stock market. This is just the largest China-focused ETF, iShares China Large-Cap ETF (FXI).
This list is just a sample of what is available to investors. The best way to build a watchlist of alternative investment ETFs is to explore them for yourself on TipRanks.
Investing Like it’s 2024
The From TINA to TARA thesis by Goldman Sachs highlights the importance of seeking new investing opportunities beyond traditional stocks in 2024. Fortunately, the world of alternative investments is becoming increasingly accessible through ETFs.
By incorporating these “alternative” asset classes into a diversified portfolio, investors can potentially improve returns at lower risk and achieve their long-term financial goals.
