- Alternative assets go beyond traditional investments like stocks and bonds.
- They include real estate, private equity, hedge funds, commodities, and collectibles.
- Alternative assets offer diversification, potential attractive returns, and exposure to non-traditional markets.
What's considered an alternative asset?
Alternative assets include investments such as real estate, private equity, hedge funds, commodities, and collectibles. They have the potential to deliver attractive returns, provide a hedge against market volatility, and offer exposure to non-traditional markets.
Are alternative assets expensive?
Alternative assets can also come associated with higher costs and less liquid markets, meaning that they can be trickier to understand and sell. Understanding alternative assets empowers investors to explore new avenues and maximise their investment strategies.
Examples of alternative assets
1. Real estate: Investing in properties such as residential, commercial, or industrial real estate. This can be done directly through purchasing properties or indirectly through real estate investment trusts (REITs).
2. Private equity: Investing in privately-held companies that are not traded on public stock exchanges. Private equity investments involve owning shares in non-public companies and participating in their growth and success.
3. Hedge funds: Investment funds managed by professionals who employ various investment strategies to generate returns. Hedge funds often utilise complex investment techniques and may have more flexibility compared to traditional funds.
4. Commodities: Investing in physical assets such as gold, silver, oil, natural gas, or agricultural products. Commodities provide exposure to different markets and can act as a hedge against inflation or geopolitical uncertainties.
5. Collectibles: Investing in items like rare coins, artwork, vintage cars, or memorabilia. Collectibles can appreciate in value over time and offer unique investment opportunities.
Real world examples
Suppose you're an investor seeking to diversify your portfolio beyond traditional stocks and bonds. You decide to allocate a portion of your investment capital to alternative assets.
1. Real Estate Investment: You invest in a real estate fund that owns and manages a portfolio of commercial properties. The fund generates income through rental payments and potential appreciation in property values.
2. Private Equity Investment: You participate in a private equity fund that invests in early-stage technology companies. This investment provides an opportunity to support innovative startups and potentially earn significant returns if those companies succeed.
3. Commodity Investment: You purchase shares of an exchange-traded fund (ETF) that tracks the performance of the gold market. This investment provides exposure to the price movements of gold, which can act as a hedge against inflation or economic uncertainties.
These examples showcase how alternative assets can enhance portfolio diversification and potentially deliver attractive returns through exposure to unique investment opportunities.
Final thoughts on alternative assets
Alternative assets expand the horizons of traditional investing by offering exciting and unconventional opportunities. They include real estate, private equity, hedge funds, commodities, and collectibles. Investing in alternative assets provides diversification, potential attractive returns, and exposure to non-traditional markets.
As an investor, it's important to evaluate the risks, benefits, and suitability of alternative assets based on your investment goals, risk tolerance, and time horizon. Exploring alternative assets can add an extra dimension to your investment strategy and unlock new possibilities on your financial journey. Embrace the power of alternative assets and unleash your investment potential!