It’s no secret that the stock and bond markets have done very well over the last six years. As bull markets go, this one is getting a bit on the old side, I believe the fourth longest running uptrend for stocks. Old age doesn’t kill rising markets, but eventually some external event does, and I believe it is time to become more risk conscious because the current trend won’t last forever.

Of course, most investments carry some form of risk, so I’m not referring to eliminating it all, just reducing it. A large part of risk comes from the fluctuation in asset prices and how we are tempted to react to those changes. When assets are traded on an exchange each day they are subject to the emotional decisions made by investors who may be feeling extreme fear such as in the 2008-2009 financial crisis.

Most companies did not see their sales and profits decline by 50 percent during the crisis, but for many their share prices sure did. It was irrational to assume that large, well capitalized companies were worth half of their previous value, but that’s how the emotional pricing works in the heat of battle.

Non-traded investment funds may provide some shelter from those emotionally based pricing mechanisms if the assets held in the funds are not traded on an exchange every day. Real estate holdings and debt issued by private companies are priced by appraisal based on rent and interest payments being current, rather than by the emotions of buyers and sellers.

Non-traded funds are registered with the Securities and Exchange Commission, just like regular mutual funds. The difference is that once purchased, the investor is generally committed to staying with the investment for several years until the portfolio is liquidated or perhaps the shares listed on an exchange. There may be opportunities for investors to cash out part or all of their holdings on a quarterly basis, but investors should generally be committed to running the course with this type of fund. Obviously, for most investors you would not want to put too much of your portfolio in illiquid investments without considering your potential needs to access your capital.

Non-traded funds often hold some of the same types of investments held in traditional traded funds, but may offer higher yields than on traded funds. The higher level of income is known as the illiquidity premium. In other words, the investor deserves a higher yield in exchange for giving up access to their money for time periods that may range from two to 10 years.

These funds commonly invest in real estate and hedge fund type alternative strategies. Another area growing in popularity is the business development company structure. Business development companies are generally involved in making loans and financing to privately owned mid-size companies across the U.S., which are currently being ignored by traditional banks for their financing needs. Yields are currently in the 6 to 8 percent range, with the potential for capital appreciation of the assets held in the fund as well.

Non-traded funds require the investor to meet minimum standards for net worth and income due to the fact they are illiquid. Requirements vary, but in general the standard is an income of $70,000 or more and net worth of at least $70,000, or a net worth of $250,000 with no minimum income requirement. Your advisor should handle the necessary paperwork for you. It is also important to understand how your adviser is compensated for helping you with this type of investment, so ask questions

In summary, non-traded investment funds aren’t for everyone, but may add value to certain investors’ portfolios.

Tom Breiter is president of Breiter Capital Management, Inc., an Anna Maria based investment advisor. He can be reached at 778-1900. Some of the investment concepts highlighted in this column may carry the risk of loss of principal, and investors should determine appropriateness for their personal situation before investing. Visit www.breitercapital.com.