The year 2020 was full of volatility in traditional stock and bond markets. It made investors look towards alternative investments beyond stocks, bonds and cash.
Alternative investments appear attractive at such times because, invariably, they show a low correlation with traditional investments.
It would be imprudent to think that choice of investment opportunities is limited outside the regular markets. Apart from routine asset classes, there is a whole world of investment options that exist.
Alternative investments range from tangible assets like art, precious metals, rare coins to financial assets like venture capital, private equity, hedge funds and real estate.
Such investments are generally not traded on public markets except for some liquid alternatives like ETFs. There is also normally less transparency around pricing. These investments are often complicated when it comes to their valuation and are highly illiquid. The valuation, at times, may require some specific knowledge.
Alternative investments could be a great addition to an investor’s portfolio. Many such investments can, at times, provide significantly greater returns in comparison to traditional investments. These could also be a good way to diversify your portfolio and help reduce its exposure to the stock market. Many low risk alternative investments like antiques, coins, or art could also create an opportunity to generate passive income.
Due to such reasons, certain types of alternative investments were quite popular among high net worth individuals but is slowly gaining acceptance among a wider group of investors.
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