Traditional investments are known as the big three: Cash, stocks and bonds. While this trio is certainly a good foundation for investing, adding more diversification is always a good thing. Take a closer look at alternative investing, what the benefits are and why diversification is so important from a financial perspective.
Range of ROIs for Investors
One of the ways that alternative investing can add diversification to a portfolio is through investments that offer a range of different ROIs. An ROI is the return on investment, or the profit that can be made through the investment. A higher ROI is best, but these types of investments tend to come with higher risks involved.
Secure, stable investments, also known as blue chip investments, tend to promise a lower average ROI. By choosing a range of alternative investments, particularly alternative investments from around the world, investors will be able to have a range of ROIs.
This can mean more stability over the long term, since there will still be the potential for major profits but the stability of a regular, secure, but low ROI on other investments.
Holdings in Varied Currency Types
Alternative investments come in many different varieties, but it is important to remember that they can also be associated with a variety of different currencies.
Many investors are worried that if they are only investing in a single currency, or making investments within a single jurisdiction, then they could be limiting themselves or making themselves unnecessary vulnerable. The reality is that even the steadiest of currencies is subject to inflation and devaluation, and all types of things can happen to make a currency worth less overnight.
Rather than placing all your eggs into one currency’s basket, diversify through alternative investments in a range of currency types from around the globe.
New Opportunities for Investment
Part of what makes alternative investment such an existing prospect for many investors is that there are such a wide number of opportunities available. Alternative investments don’t just come in a single form, and they can include a range of options.
Many people opt for international real estate, but this could be a private vacation home for family use, a beach condo to use as an income-generating vacation rental or a commercial property to lease to an expat business.
Other types of alternative investments could include precious metals on an international market, international mutual funds, a trust for loved ones, international life insurance wrappers or even an antique jewelry collection.
Geographic Diversification to Mitigate Risk
Investing typically has two overall goals: Making profits and maintaining wealth. When the goal is to protect assets, alternative investments can be key.
To start, they may be able to limit your individual taxation, particularly if your investments are held in a tax-friendly jurisdiction. In addition, physically keeping assets overseas in the form of alternative investments could protect investors from having their assets seized or frozen in their home countries, which can happen as a result of legal matters.
Simply by keeping assets in more than one country, investors can reduce their financial vulnerability in a major way. Alternative investing, particularly with the help of Caye International Bank, can add much-needed diversification to virtually any portfolio.