Alternative Investments
Alternative investments are all assets outside the traditional portfolio mix of stocks, bonds, mutual funds, exchange-traded funds (ETFs) and cash. These investments have advantages and disadvantages that are important to analyze and understand.
These kinds of investments differ from traditional investment types because they aren’t easily sold or converted into cash. It’s also common for alternative investments to be referred to as alternative assets. Alternative investments can vary wildly in their accessibility and structure, but they share a few key characteristics: (1) They’re more lightly regulated by the US Securities and Exchange Commission (SEC) than traditional investments (2) They’re illiquid, meaning they can’t be easily sold or otherwise converted to cash (3) They often have a low correlation to standard asset classes, meaning they don’t necessarily move in the same direction as other assets when market conditions change.
Some common examples of alternative investments include private equity, venture capital, private debt, hedge funds, commodities, art, and real estate.