Know more about Alternative Investments

Know more about Alternative Investments

An alternative investment is an investment different from cash, stocks, and bonds and can be investments in financial assets such as hedge funds, private equity, real estate, commodities, and infrastructure. Besides, they can be investments in intangible assets such as wines or famous poetry and other art forms.

Features of Alternative Investments

Almost all alternative investments come with the following features that distinguish them from traditional forms of investment:
• Low liquidity
• Unregulated and have less clarity
• Possess distinct tax treatment
• High purchasing cost
• Difficult to determine their exact value

Categories of Alternative Investments

There are six different categories of alternative investments:

Hedge funds
They are exclusive, available only to institutional investors and high-net-worth individuals. They employ various investing strategies to earn a high return on their investment.

Commodities are real assets and mostly natural resources, such as agricultural products, oil, natural gas, and precious and industrial metals.

Private Equity Funds
It is a category that refers to capital investment made into various private companies not listed on a public exchange or any publicly traded firms that they intend to take private.

Real Estate.
Real estate investments will include residential or other commercial properties for real estate-backed investment bonds.

These are the assets that render public services like roadways, airfields, service grids, schools, and hospital investments.

Other (collectibles)
This category includes investment in tangible collectible assets such as fine wines, stamps, antique furniture and automobiles, and art, as well as intangible patents.

Do alternative Investments differ from Traditional Investments?
Generally, alternative investments will show a low correlation with traditional forms of investments making alternative investments an immeasurable addition to an investor’s portfolio. Many alternative investments provide significantly greater returns relative to traditional investments.

These securities are tailored and structured uniquely. It is different from how we perceive traditional securities and have a distinct fee structure. Some of these investments may attract additional fees that are performance-driven.

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