Alternative investments offer small and institutional investors an opportunity to diversify their portfolio. Check everything you should know about top investment opportunities in this complete guide.
The top alternative investments to watch in 2020 hold a lot of promise for the near future. These investments offer investors an opportunity to diversify their portfolio. Accordingly, anyone looking forward to the prospect of their money growing significantly needs to give each of these a serious consideration.
What is an Alternative Investment?
Investments other than these three traditional assets: cash, bonds, and stocks are known as alternative investments. These investments come with a promise of immense returns, however, they are risky. The risky nature of these assets can be tied to the fact that they are unregulated, unlike the traditional asset classes.
On the other hand, alternative investments can be classified as tangible and intangible investments. Some examples of tangible alternative investments are:
- Fine art
- Real estate
- Precious metals
- Commodities and natural resources
Some examples of intangible alternative investments are:
- Hedge funds
- Private equity
- Venture capital
- Derivative contracts
Pros of Alternative Investments
The benefits of alternative investments are:
Alternative investments help to diversify an investor’s portfolio, thereby redistributing the risk. In this case, return on investments is not tied to the performance of the stock market. As such, neither does a dip in the stock market nor economic uncertainty have a major impact on returns.
There is no guarantee that profit will always be made while investing in alternative investments. However, there’s a potential for the profit made from these investments to be higher compared to returns from traditional investments.
Cons of Alternative Investments
The disadvantages of alternative investments are:
High Cost of Investment