How Alternative Investment Strategies Can Make You Money

While most Americans are familiar with investing through stocks and bonds, not as many know about alternative investment strategies. These lesser known investment avenues aren’t just for the very wealthy, either. Americans of all ages are quickly learning about alternatives to traditional investments as these lesser known options really do represent a sound financial strategy for building wealth.

Alternative Investments Defined

Futures, private equity, real estate, currencies, distressed debt, commodities and more are all different kinds of alternative investments. It is prudent to invest in them for a number of reasons. Alternatives to traditional stocks and bonds serve to diversify one’s portfolio. Financial experts believe that between 10 and 20 percent of every portfolio should be invested outside of stocks, bonds, mutual funds and cash. Doing so spreads out one’s risk and exposure to market swings. They are referred to as “non-correlated” investments, meaning that their values can rise and fall regardless of what is happening in the stock market. As most know, there’s a herd mentality on Wall Street. When top investors begin to sell, others often follow suit. It is why the market has such wild shifts in short periods of time. Alternative investment strategies reduce one’s exposure to these market movements.

Returns On Your Alternative Investment

Aside from adding diversity to one’s portfolio and minimizing risk, alternative investment strategies are also beneficial for the fact that they are sound investments. Investors who choose to put their money in currencies, real estate, private equity, commodities and other alternative investments often see significant gains. These avenues aren’t merely safe havens away from the risky stock market. They are real money making opportunities.

The challenge of wealth building is finding the appropriate mix of investments that will produce long term gains. It’s a delicate balance that few can perfect. The key is to increase diversification while reducing volatility and exposure. Therefore, portfolios without alternative investments are at a greater risk as they’ll be subjected to the whims of the market. Every savvy investor understands that his portfolio should have a plethora of investments to decrease risk. The smartest understand that their investments should not correlate. That is, stimuli that affects one investment within a portfolio should not have an impact on the other investments. When investments correlate, there is the potential for massive losses as a result of a single economic, political or social occurrence. This is why alternative investment strategies are so valuable. They ensure that the assets which compromise your portfolio won’t tank in unison.

There’s plenty of strategy involved in alternative investing. This space provides many different styles and choices for those seeking a means of investing outside of traditional avenues. Investing in alternatives truly are a distinct asset class that must be thought of as being completely independent from stocks, bonds and cash. Intelligent investors are always looking for a new investment opportunity that deviates from the realms that they are currently invested in. This is exactly why investing in the alternative space is a sound financial decision. Look for alternative investment strategies to continue to grow in popularity and eventually reach a mainstream tipping point.