What are alternative investments?
Alternative investments are investment options that fall outside of traditional investment classes like stocks and bonds. “Alternative investment” is an umbrella term used to describe a number of tangible and financial assets that can be added to complement traditional investments in a high-performing portfolio.
How can alternative investing strategies bring diversification and balance to a portfolio? They are typically less severely impacted by market volatility than traditional assets like stocks and bonds, as they are not tied to the market. In certain environments, they can help to increase returns, generate passive income, and mitigate certain risks in your portfolio.
Taking advantage of the benefits in the many types of investment alternatives requires smart, strategic investing, as alternative assets all come with their own specific sets of risks. Working with a fiduciary investment management team, with experience in minimizing risks and investing in alternative investments, can help you select and access the right investments for your financial situation.
Types of alternative investments Avidian might recommend
How will you know what to buy, and when? There are countless types of alternative investments that might strengthen any given portfolio, but these opportunities can change rapidly, and depend on the portfolio as much as the opportunities themselves. Some alternative investment examples that might fit within your portfolio include:
- Hedge funds: High-risk, high-reward prospects in which investors pool their money to invest in publicly traded securities across global markets.
- Private capital: This includes any investment in private companies that can later be sold off for a profit. This usually includes buying failing companies looking to bounce back or investing in promising startups poised to grow exponentially.
- Real estate: Property can be a great hedge against inflation as it is not dependent on market performance.
- Managed futures: Managed futures funds attempt to take advantage of shifting tides during market declines.
- Commodities: Commodities include tangible assets like gold, minerals, oil, natural gas, or grain. These are usually bought low and held through inflation or market booms before being sold.
Each of these investments will come with its own set of risks and rewards. In general, investing in alternative investments exposes you to significant liquidity risks, as these investments are largely illiquid. It is important to complete a thorough due diligence when considering an alternative investment as they are unregistered and not subject to the same regulations and oversight as a publicly traded asset.