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Diversification is the ONLY free lunch

As we move through 2025, investors are facing a landscape that feels less predictable than in years past. The old playbook—what worked for decades—isn't delivering the same level of comfort given budget and tariff concerns. One of the most common approaches to investing, known as the 60/40 portfolio (60% stocks, 40% bonds), has served as the foundation for many investors. But lately, that mix has been under pressure and could have a period of time where results are less than stellar.

The Shifting Investment Climate

In April 2025, the stock market reminded us just how quickly things can change. Global events—trade tensions, political uncertainty, and continued inflation concerns—sparked sharp swings in prices. Bonds, which many expect to rise when stocks fall, didn’t always behave that way. This left many portfolios with little protection just when investors needed it most.

A recent J.D. Power survey found that more than half of investors feel this is the toughest climate they’ve experienced. That’s especially true for younger investors, many of whom haven’t seen prolonged volatility before.

It’s clear the traditional blueprint doesn’t offer the cushion it once did. That’s where thinking outside the box—and beyond the standard stocks and bonds portfolio—becomes more important.

Why Alternatives Matter Now

Alternative investments, often referred to simply as “alternatives,” can play a key role in strengthening your investment mix. These can include things like real estate, private companies, farmland, commodities (like gold or oil), and infrastructure projects. What makes them attractive is that they often don’t move in lockstep with the stock market. This lack of correlation is very attractive from a risk/return perspective. 

Here’s why adding alternatives may be a smart move:

  • More Stability: When markets are choppy, alternatives tend to behave differently than traditional investments. Attractive returns with lower correlation between assets is the "Holy Grail" of investing.

  • Broader Diversification: Instead of having all your eggs in one basket—say, just U.S. stocks or bonds—alternatives give you more baskets. That’s important when one part of the market is struggling.

  • Inflation Protection: Certain alternatives, like real estate and commodities, tend to hold their value better when prices are rising.

  • Unique Growth Opportunities: Some alternatives let you tap into areas that aren’t accessible through the stock market, like early-stage private companies or infrastructure developments.

Making Alternatives Work for You

At Pillar Capital, we don’t believe in a one-size-fits-all solution. Whether or not alternatives are a good fit for you depends on your net worth, goals, comfort with risk, and time horizon. It’s not about chasing fads—it’s about building a solid, durable plan.

We often recommend starting with a modest allocation—something meaningful but manageable. For example, investing in a private credit fund as an alternative to traditional bond portfolios or a real estate fund that produces steady income. The goal isn’t to bet big, but to round out your portfolio in a thoughtful way.

It’s also important to note that alternatives can be more complex than traditional investments. They may not be as easy to buy and sell, and they sometimes come with higher fees. That’s why working with a fiduciary advisor who puts your interests first is crucial. At Pillar Capital, we help clients evaluate each opportunity clearly and objectively.

Looking Ahead

There’s no question 2025 has brought its share of uncertainty. But smart investing isn’t about predicting the future—it’s about preparing for it. That means building a portfolio that can adapt to different environments, not just the ones we’ve grown accustomed to. 

By carefully incorporating alternatives into your investment mix, you can help insulate yourself from the bumps in the road and open the door to opportunities that might otherwise be overlooked. This can give you a higher risk/adjusted return in your portfolio which could make riding out volatility in financial easier for you and your family.