Alternatives to US stocks?

[cbloom]

Let me preface by saying I know very little about investing, so I'm looking for help. Currently I have all my savings in various big long-term growth mutual funds, a mix of small-large cap, foreign & US, etc. but it's all stock because I'm young.

My question is - if I want to get out of so much stock, is there anywhere else that I can put money for long term growth that will perform similarly to stocks, but not be on the same cycles?

More specifically, I believe that the US and perhaps many other countries are headed for a bad recession and I'd like to pull out a chunk; I know blah blah don't market time, I don't really want to discuss whether or not you think the US stock market is headed down the tubes - I'd just love to know if there are any alternatives.

One thing I've learned is that foreign stocks are no refuge; they seems to be very strongly tied to the US market, presumably partly because everything is so connected, but also because all the "emerging markets" countries make so much of their money exporting to the US so if the US consumer strength plummets the emerging markets will plummet. I'd like to get into some investments that aren't so directly correlated to the S&P for example.

[ahnuld]

bonds??

[mosdef]

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bonds??

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No - "I can put money for long term growth that will perform similarly to stocks, but not be on the same cycles?"

He needs other equity negatively correlated to the stocks he's already got to achieve this.

[mark_foley]

I have had a similar outlook, albeit with a better outlook for the non-US world economy, as you and have put my money into gold stocks, big cap euro and aussie stocks, and foreign currencies.

They haven't fared so well during the recent sell-off as scared money as flocked into 2 year US treasuries.

[DcifrThs]

[ QUOTE ]
Let me preface by saying I know very little about investing, so I'm looking for help. Currently I have all my savings in various big long-term growth mutual funds, a mix of small-large cap, foreign & US, etc. but it's all stock because I'm young.

My question is - if I want to get out of so much stock, is there anywhere else that I can put money for long term growth that will perform similarly to stocks, but not be on the same cycles?

More specifically, I believe that the US and perhaps many other countries are headed for a bad recession and I'd like to pull out a chunk; I know blah blah don't market time, I don't really want to discuss whether or not you think the US stock market is headed down the tubes - I'd just love to know if there are any alternatives.

One thing I've learned is that foreign stocks are no refuge; they seems to be very strongly tied to the US market, presumably partly because everything is so connected, but also because all the "emerging markets" countries make so much of their money exporting to the US so if the US consumer strength plummets the emerging markets will plummet. I'd like to get into some investments that aren't so directly correlated to the S&P for example.

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basically, what you're asking is:

is there an asset that will perform as well as stocks do in the long run while at the same time not do poorly when the business cycle turns down (i.e. low growth/ high or low inflation environments)

the only answer i can give you is leveraged bonds. when growth turns down into recession, rates are forced lower. equities may not recover for some time but bonds immediately rise in value. you need to lever them though to hit the risk target of equities.

most other asset classes (if not all) do not perform well when growth falls.

your other option, if you don't want bonds, is to simply withdraw a portion from the market and put that money in cash. it won't perform as well as stocks, but it will not decrease in value, which stocks would do if a recession popped up.

Barron

[ahnuld]

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bonds??

[/ QUOTE ]

No - "I can put money for long term growth that will perform similarly to stocks, but not be on the same cycles?"

He needs other equity negatively correlated to the stocks he's already got to achieve this.

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I realise what hes asking but there is no such asset, especially if a requirement is to preform as well as stocks.

[gull]

No such asset exists.

Nevertheless, REITs, CCFs, bonds, and TIPS are good diversifying assets.

[DcifrThs]

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bonds??

[/ QUOTE ]

No - "I can put money for long term growth that will perform similarly to stocks, but not be on the same cycles?"

He needs other equity negatively correlated to the stocks he's already got to achieve this.

[/ QUOTE ]

I realise what hes asking but there is no such asset, especially if a requirement is to preform as well as stocks.

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over the long run, TIPS are the least correlated with stocks.

so if you lever TIPS you get the long term risk target of stocks w/ a low correlation.

Barron

[cbloom]

What are TIPS? (it's hard to Google a word like that!)

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I have had a similar outlook, albeit with a better outlook for the non-US world economy, as you and have put my money into gold stocks, big cap euro and aussie stocks, and foreign currencies.


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Yeah, just from my limited "common sense" it would seem that 1st world country stocks are much less correlated to the US than developing countries, so I could put some $$ in euro companies. Your other picks just look like shelters/security for bad news which isn't exactly what I'm looking for.

Just to be clear I don't necesarilly need something that's negatively correlated to US stock performance, but something that's just not correlated. eg. I'm not trying to smooth out short term variance, so much as make sure that my money is still growing if the US economy is 0 growth for the next 20 years or something.

[DcifrThs]

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What are TIPS? (it's hard to Google a word like that!)


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treasury inflation protected securities. pays last 6mo CPI in addition to stated real coupon.

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I have had a similar outlook, albeit with a better outlook for the non-US world economy, as you and have put my money into gold stocks, big cap euro and aussie stocks, and foreign currencies.


[/ QUOTE ]

Yeah, just from my limited "common sense" it would seem that 1st world country stocks are much less correlated to the US than developing countries, so I could put some $$ in euro companies. Your other picks just look like shelters/security for bad news which isn't exactly what I'm looking for.

Just to be clear I don't necesarilly need something that's negatively correlated to US stock performance, but something that's just not correlated. eg. I'm not trying to smooth out short term variance, so much as make sure that my money is still growing if the US economy is 0 growth for the next 20 years or something.

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well first off, i highly doubt US is not gunna grow for 20 years. i can't imagine what would happen that would cause 0 growth for 20 years. i mean it COULD happen, but i don't think anything would be growing in value during that time. it would be worse than the depression.

so you want a lowly correlated asset (nothing is negatively correlated over the long run), you just have to be willing to use leverage or give up returns. no other option really.

Barron