Everyone around is constantly speaking of Alternative Investments. So what are these investments? An investment product other than traditional investment of stock, bonds, cash or property is called an Alternative Investments. The term itself is a relatively loose one and associates itself with tangible assets like wine, antiques, art, stamps or coins.
Other financial assets include hedge funds, private equity, film production, venture capital, and other financial derivatives. While most of such investment assets are held by high- net- worth individuals or institutional investors, due to their complex nature, relative lack of liquidity and limited regulations. Some of the most common investment strategies real estate’s investment trust, hedge funds, managed futures, private equity, venture capital and limited partnerships.
One common theme to alternative investment is that they are often thought to possess modest relationships with customary investments and so to increase the divergence of investor’s portfolios. These investments are preferred because their returns have a low correlation with those of usual assets classes. Because of this, many large institutional funds such as pension and private endowments have begun to assign a small share (generally less than 10%) of their portfolios to investments such like hedge funds.
Alternative Investments also have high fee structures and higher minimum investments, when compared to ETFs and mutual funds. At the same time, they are subjected to lesser regulation; hence, the opportunity to publish accurate performance data and advertise to potential investors is also much less. This slams the door on the face of the small scale investor, while keeping their investment doors open for commodities vehicles such as REITs and real estate.
To start with one should find appropriate funds and get the information about types of investments these funds would be dealing with. Next, one should select the most appropriate type of Alternative Investment and initiate their act. This might sound a bit simplified, but there are there are lots of issues that one should take into account.
However, the major idea here is that investment funds give lots of possibilities for those who don’t want to invest money or acquire stocks for sum reasons. It may also cater to the requirements of those who do not stay without customary investment, as it helps to diversify the risks by investing in several different funds in order to protect themselves from heft losses.