The markets have see-sawed hundreds of points over the past few days as Americans voted and the aftermath became clear.
Stock markets have historically been susceptible to significant events, and the Donald Trump upset win in the presidential election certainly qualifies as that.
What is an investor to do?
Bonds aren't the answer. Increasingly, they move in the same direction as stocks during market ups and downs. That makes them less attractive than in the past as a hedge on market risk.
A byproduct of this trend: Investors are taking a closer look at private-equity real estate and other alternative investments. Shielded from daily market swings, these assets strengthen portfolios with their high returns and low volatility.
In addition, there is a bigger change in investment strategy that plays to the strength of private-equity real estate. It is the shift to goal-based investing that has gained traction amid low interest rates.
With goal-based investing, the benefit isn't the premium return, as rewarding as that may be. It is knowing assets will be there when needed, be it for a college education, a second home, retirement income or even endowing future generations.
Financial advisers work with their clients to understand why they are investing their money, then target their investments to reach a budgeted amount by a certain date.
In the process, advisers are taking a page from the real estate, private-equity playbook by timing their investments for maximum returns when the asset will be sold, rather than constantly chasing short-term gains. It is a strategy that makes good sense and plays to the experience of the real estate portfolio managers.
Newly popular smart-beta funds try to deliver on these goals at an acceptable risk to the client.
By definition, private-equity real estate is also a goal-seeking investment. Value-added real estate projects work long-term to create value in under-performing assets, building both an income stream and market value.
Advisers look at life goals to generate the right returns at the right time. Private equity real estate can tie up principal for several years. So advisers create asset portfolios to match the duration of each goal. These investments can be ideal for long-range needs, while more imminent goals, such as funds for a business deal or new car, are parked in more stable, liquid assets.
Advisers gauge a portfolio's progress on its performance to meet specific personal goals vs. beating the market or getting the highest possible return. By breaking down portfolios this way, investors can stay on track toward meeting their objectives even when the market twists and turns.
While most investment plans have time-based goals, portfolios are often managed as one big pot of money, mixing conservative and growth investments to meet multiple objectives and achieve maximum rewards. Separate portfolios can also make asset allocation more tangible and easily managed. That's because investors can watch separate portfolios and more easily tell if they are meeting their targets.