Alternative investments are different from traditional investments. And does not fall in the category of traditional investment of stocks, bonds, and cash. An alternative investment is in itself a different asset class. The investment includes Private Equity or Venture Capital, Hedge Funds, Managed Futures, Commodities, Derivatives, and Real estate is also considered as an alternative investment.
Alternative investments are done by institutional investors or high-net-worth individuals. Traditionally alternate investments were not for retail investors because of the huge amount required for the investment. But in recent times it has been feasible to them by the way of liquid alt, ETF’s, and mutual funds which require a minimal amount of investment. They build the portfolios of alternative assets for retail investors.
Alternative investments are illiquid in nature, thus anyone in need of liquid strategies should not opt for alternate investments. It is true that alternate investments provide higher returns than traditional asset class but, at the cost of complexities and high risk that it carries with itself. Any risk-averse investors should think twice before investing in alternative investments.
Alternative investments are good for the long term horizon. The low correlation of alternate assets with the traditional asset class gives the benefit of diversification. It helps to lower the risk exposure when combined with the portfolio of stocks and bonds. It helps to improve the graph of the efficient frontier. The efficient frontier is the best combination of assets, where optimum risk and optimum return is maximized.
Alternate investments are a good way of inflation hedge. Thus, anyone’s portfolio having the exposure to inflation can get it hedged via investing in the alternative asset class. The different categories under alternate investments have different pros and cons. Hence, if you’re wanting to invest in any of the categories then you must go through the characteristics to get a better idea.
Occasionally, alternate investments are not registered with the SEC and thus not overseen or regulated by the SEC. Hence, it is crucial that investors do extensive due diligence before investing in an alternate asset class.
Alternate investments are difficult to value. Thus, in this case, it becomes essential on the part of an investor to take the help of a portfolio manager to get and know the exact value of their investment. Therefore, management expertise is required to effectively carry out the investment.
There are many corporations that provide the service. A lot of people have asked about the Harbor City Capital Reviews. The CEO JP Maroney did an interview with a current investor and talks about ‘is Harbor City Capital legitimate’. Certain schemes are great but some are worse to invest, which also comes with a lot of disagreements.
Therefore, there are many things to be considered while investing in an alternate asset class. Understand your risk profile and accordingly choose the category that best suits your risk-return criteria. Effective due diligence must be done before putting your money in the market. Make your money worth investing in.