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Alternative investments are financial assets that are not considered conventional investments. While conventional investments include stocks, bonds, and cash; some of the alternative investment options are hedge funds, #commodities, private equity, #debentures, venture capital, art, wine, and derivatives contracts. Oh, and did you know real estate can also be considered an alternative investment?
They also typically have a low correlation with the so-called standard investments. This means the alternative investments have their own trend of performance and they do not move always in the same direction stock and bond markets go. This feature makes alternative investments a suitable tool for portfolio diversification.
Investments in hard assets, such as gold, oil, and real property, also provide an effective hedge against inflation, which hurts the purchasing power of paper money.
In summary, alternative investments provide portfolio diversification, hedge against inflation, higher return rates, and can also work as a tool to reduce risk without hurting the returns.
