Key differences between Private Debt and other asset classes

1. Savings: Security and availability

Saving is often the most conservative approach. It offers a high degree of capital protection up to €100,000 under the government’s deposit guarantee scheme, but the return of an average of 1.5% to 3.5% per year is relatively low. One advantage is that your capital is available. It is ideal for short-term goals (1 to 5 years) and capital preservation.

2. Equities: Return as well as volatility

Equities offer potentially high returns. However, they are also associated with higher volatility and risk. The degree of volatility of the price of a stock or other financial product, such as a stock index or currency, has much effect on the value of the investment. Stocks are often found attractive by investors looking for long-term growth (10 years or longer).

Long-term returns are about 8% to 10% per year, with sharp spikes up and down.

3. Bonds: Relatively stable and periodic income

Bonds (depending on the debtor) offer stability and periodic interest payments, making them suitable for investors who want to generate income and prefer low risk. By the way, there is volatility in the stock price. With rising interest rates, this has a negative effect, while with falling interest rates there is a positive effect. Long-term returns involve about 4% to 5% returns per year.

4. Real Estate: Physical Property and Diversification

Investing in real estate involves buying physical properties, such as homes or rental properties. Real estate offers diversification in the distribution of total assets, stable returns and can provide protection against inflation. However, it also requires management and maintenance, making it relatively labor-intensive. The long-term return is about 4% to 10% per year.

5. Private Debt: Loans with fixed returns.

Private Debt involves investing in loans to SMEs and real estate investors. It allows investors to generate immediate returns through interest income, but it also carries risks. The quality of loan selection and management is important to the return. The rate of return is about 6% to 9% per year. This asset class is often not tradable, i.e. not liquid.

6. Private Equity: investing in unlisted companies

Private equity involves investing in unlisted companies. It can yield significant returns, but it requires a long-term commitment. Investors must be willing to accept the lack of liquidity and higher risks. The long-term return is 10% to 20% per year.

Do your own research and seek advice

Each asset class has its own advantages and disadvantages. The ideal portfolio depends on individual goals, risk appetite and investment horizon. A balanced approach combining different categories can spread risk and maximize potential returns.

My advice for investors? Do your own research and seek professional advice. Diversification, regular review and adapting the portfolio to changing market conditions are crucial to a successful investment strategy.