4 Common Types of Alternative Investments
Alternative investments are non -correlated assets that are not among the conventional investments such as stocks, bonds, and cash. It is estimated that since 2005 the global assets have grown twice as fast as the traditional investments according to McKinsey & Company, a global consulting company. A survey conducted in 2015 showed that advisers had 73% of their clients in alternative investments. The assets increase is caused by the Investors need to diversify their portfolio so as to include a wider range of assets. This helps to reduce volatility, generates better returns, hedges against inflation and to access steady and reliable sources of income. A study conducted by the Informa Investment Solution and published by Blackrock revealed that alternative investments didn’t fall as much as the traditional investment during the 2001-2008 recessions. Majority of financial advisers recommend investing not more than 25% of your portfolio to alternative investments. This is because a majority of the alternative investments tend to be illiquid. Here is a list of the major alternative investments to include in your portfolio:
1. Hedge funds
Hedge fund is a type of alternative investment where investors pool funds and use different strategies to earn returns. Hedge funds are managed to utilize derivatives and leverage to generate high returns. Hedge funds are classified according to their investment styles and their risks also differ among the different styles. Hedge funds are only accessible to accredited investors and require a large minimum investment but require less SEC regulation than mutual funds and other investment vehicles. Hedge fund requires an investor to keep their money in the fund for at least one year period otherwise known as lock-up period and thus is quite illiquid...
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Alternative investments are non -correlated assets that are not among the conventional investments such as stocks, bonds, and cash. It is estimated that since 2005 the global assets have grown twice as fast as the traditional investments according to McKinsey & Company, a global consulting company. A survey conducted in 2015 showed that advisers had 73% of their clients in alternative investments. The assets increase is caused by the Investors need to diversify their portfolio so as to include a wider range of assets. This helps to reduce volatility, generates better returns, hedges against inflation and to access steady and reliable sources of income. A study conducted by the Informa Investment Solution and published by Blackrock revealed that alternative investments didn’t fall as much as the traditional investment during the 2001-2008 recessions. Majority of financial advisers recommend investing not more than 25% of your portfolio to alternative investments. This is because a majority of the alternative investments tend to be illiquid. Here is a list of the major alternative investments to include in your portfolio:
1. Hedge funds
Hedge fund is a type of alternative investment where investors pool funds and use different strategies to earn returns. Hedge funds are managed to utilize derivatives and leverage to generate high returns. Hedge funds are classified according to their investment styles and their risks also differ among the different styles. Hedge funds are only accessible to accredited investors and require a large minimum investment but require less SEC regulation than mutual funds and other investment vehicles. Hedge fund requires an investor to keep their money in the fund for at least one year period otherwise known as lock-up period and thus is quite illiquid...
To view the full article, visit FinanceAttitude.com