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Alternative Investments

December 19th, 2019

For many people who enter the world of investing, Wall Street offers enough options to satisfy their curiosity. But for others, that’s just not the case. Some people would like to make their money do something but have no faith in the market, and don’t want it sitting in a bank. And if handing it all to an insurance company in exchange for an annuity doesn’t sound like your cup of tea either, then Alternative Investments might just be something for you to consider. What are Alternative Investments? With the help of James Chen of Investopedia, that is the exact question in which this article is meant to answer. Read on and see if Alternative Investments are something that might fit into your portfolio. 

Alternative Investments are basically a Financial asset that doesn’t fall into conventional investment categories. So, not stocks, bonds, annuities, or anything in that ballpark. In fact, it is easier to describe what an Alternative Investment isn’t than what it is. Alternative Investments can range from real estate and commodities, to hedge funds, arts and antiques, and venture capital. But Alternative Investments do have some similarities among them.  First, they usually have high minimums, due to their unconventional nature. Second, these assets are usually illiquid. If you are trying to sell a house, or an 80-year-old bottle of wine for example. This kind of asset, however valuable it may be, will not sell as fast as a few hundred shares of Apple. Another thing that they have in common is that they should be researched by a professional. Most alternative investments don’t have a very long record, successful or not, so it’s hard to gauge long term success. Not only that, but for some niche markets, such as wine, Real Estate, and venture capital, need to be investigated by an expert in their respective fields. You don’t want to be putting your money into a new sports equipment company when you have never pitched a hole in one in your life.  

With all the complications come some great benefits to Alternative Investments. They typically have a low correlation with the market and other traditional investments. This means if a sector of the market was hit hard, you may see some effect on your investment but certainly not in the same capacity. These investments can also usually provide a hedge against inflation, especially if the investment is something such as real estate or precious metals. 

Some people live by alternatives, some would rather stick to the bread and butter. But, one thing is for sure, Alternative Investments are worth looking into to bolster your portfolio. A properly diversified portfolio can be tactically used to take advantage of the market in just about any and every situation. Remember, Plan Smarter Live Better