To address these issues, investors are faced with a standard menu of options (Figure 1). To improve the balance between risk and return in your portfolio, you can reallocate to asset classes that offer better risk-adjusted returns, lower correlation, or both. For example, in recent years, certain investors have increased their exposure to alternatives, including private equity and illiquid private assets such as real estate. While this has been a successful approach, this type of vehicle is not available to many individual investors.
