As an investor, you never know what new twists the market is going to throw at you. Thanks to social media madness, investors now keep their eyes on social media platforms like Reddit, and on out-of-favor companies like GameStop. Just add that to other complications thrown at investors in the last year such as SPACs, short squeezes, IPO pops, V-shaped recoveries, Capital riots, and vaccine deployments. I guess the one thing that investors can count on is market volatility.
Volatility is the Enemy of Returns
At Aloha Capital, we believe that market volatility is the enemy of consistent, repeatable returns, and wealth creation. Generally, when we talk about volatility, we’re speaking about large swings in the price or value of an investment. That investment can be a stock, a property, a commodity, a portfolio, or even a worthless stock undeservedly pumped up on Reddit.
Investors have experienced quite a bit of volatility in the market over the last two decades. Investing fads come and go. Strange new phenomena such as Reddit, GameStop and short squeezes rear their ugly head from time to time. However, smart investors are always seeking investments that exhibit stable, consistent annual returns, coupled with low volatility.
Home is Where the Heart (and Low-Volatility) Is
So, where should investors look for more consistent, lower volatility returns? We continue to believe that the single-family real estate market will continue to deliver the strong, consistent, and repeatable returns that smart investors seek. Certainly, residential real estate has been a safe haven from volatility during the current pandemic.
We have been writing for some time about the underlying strength in the residential housing market. Now it appears that the Pandemic may be further fueling that strength. “The housing market is, ironically, benefiting from the coronavirus,” said Ralph DeFranco, global chief economist at Arch Capital Services Inc. “We’re seeing just red-hot demand for both bigger homes but also second homes, and also millennials moving into homeownership from rental.”
“Americans are viewing their home as something more than what it was before, as they spend more time at home due to the pandemic,” said Lawrence Yun, NAR’s chief economist. “Right now, there is a greater interest for larger-size homes.” At Aloha, we believe that this dynamic (along with others) will help the residential real estate market continue to thrive, even in these turbulent and volatile times.
Low Volatility + Consistent Returns
All Aloha, our loans are collateralized by single and multi-family residential real estate, first position liens, and personal guarantees from sophisticated real estate investors. This combination is what has allowed us to deliver over 70 consecutive months of positive performance (and counting). Feel free to give us a call if you are interested in learning more.
Steve Sapourn is co-founder and portfolio manager at Aloha Capital. He specializes in designing low-risk portfolios that reliably out-perform benchmarks. Steve has managed alternative investments in a variety of asset classes for nearly 25 years. His accomplishments include creating and implementing quantitative trading strategies in the futures, stock, and volatility markets. He’s also served as portfolio manager for a Fund of Funds, where he analyzed hundreds of alternative investment strategies.