Traditional investments are typically defined as cash, stocks and bonds. This trio of investments is an important part of any portfolio, and many investors exclusively deal with these three types of investments. However, venturing beyond the traditional to alternative investing also holds plenty of appeal. Find out why alternative investing is becoming less and less alternative and more mainstream among professional and amateur investors alike.
Alternative Investing Adds Integral Diversity to a Portfolio
There is no doubt that diversifying a portfolio is an important part of mitigating risk and reducing financial vulnerability. However, diversification can go beyond just different types of stocks and bonds. In addition to the more traditional investments, alternative investments can increase diversity even more.
Things like precious metals or real estate can provide some much-needed contrast to a more traditional portfolio, and that can go a long way to reducing risk to the holder.
Alternative Investments Sometimes Promise a Higher ROI
One of the primary objectives of any investment is obtaining the highest possible ROI, or return on investment. A modest ROI can sometimes be obtained through traditional investments, although they may be just keeping ahead of inflation.
When investors are willing to take a slightly bigger risk in order to enjoy a higher ROI, alternative investments make sense. Taking a chance through venture capitalism or valuable timber in a new country might carry more risk for investors, but when those risks pay off it usually equates to a staggering and worthwhile ROI, meaning bigger profits for you.
Alternative Investing Offers a Wider Range of Opportunities
Some investors feel limited with their investment options and want to feel free to explore new opportunities for the financial portfolio. Alternative investments allow for that exploration, and there is no shortage of new and potentially profitable investments for individuals to consider. Plus, some of these investments may double as hobbies or vehicles for family fun and stability.
For instance, your collectible or antique collection is a form of alternative investing. If you wanted to have an investment that also brought joy and great memories to your friends and family, you could opt for an overseas beach house that gets used as a vacation spot each summer. Some alternative investments may also be helpful when estate planning, as they could be placed in trusts or insurance wrappers to minimize tax impact and care for loved ones in the future.
Alternative Investments Don’t Have to be Tied to a Single Currency Type
One of the biggest concerns for investors today, particularly thanks to a variety of economic and political actions that can impact the financial sector, is the value of a particular currency. Overnight, currency’s value can drop, reducing the purchasing power for its holders.
One of the definite advantages of alternative investments is that they don’t need to be linked to a particular currency. If you choose to buy real estate in Belize, for instance, you could turn around and sell it in Euros or Yen, depending on what currency you wanted to access and use in the future.
Alternative investments are no longer fringe strategies employed by fund managers. Today, these smart investments are going mainstream, and they can definitely be beneficial to individuals ready for greater stability and more profit.