Is it time to look at Alternative Investments?
In times when financial markets are literally bleeding profusely on the international indices, the fear for security of your investments is not completely unfounded. What started off in the US with sub-prime crisis has assumed menacing proportions worldwide. Resultantly and justifiably so, everyone is having a re-look at their portfolio with a view to safeguard their long-term and short-term interests. Inevitably, people are getting increasingly restless on the reliability of traditional investment options, like stock, bonds, or even cash. In other words, alternative investments are catching the fancy of astute investors who care for every dollar they invest.
For the uninitiated, an alternative investment is any kind of investment that is not in the form of stocks, bond, and cash. These three forms of investments may be termed as ‘traditional investments’. However, this is a very broad definition of alternative investments and can include hedge funds, real estate, venture capital, private capital, precious metals like gold, timber, art, antiques, and practically, any form of investment that do not fall under traditional investment category.
The next obvious question that begs an immediate answer is “why should I have alternative investment plans for my portfolio?” To start with, there is an age-old saying among the financial consultants ‘Never put your eggs in a single basket!’ Therefore, diversification of portfolio is the first reason why you should go for alternative investments.
By diversification, we mean that your portfolio must reflect a judicious blend of traditional and alternative investment so that bad performance by one sector is adequately covered by corresponding good performance by another sector. For instance, let’s presume your portfolio comprises of stocks, real estate, and gold investments. Losses from stocks, as has been witnessed during the current global financial meltdown, could be minimized by gains from the gold investments. Similarly, booming real estate prices can cover for dipping gold market. In a nutshell, when you have diversified your investment portfolio by including both traditional and alternative investments, you are giving yourself a chance to be safe in such volatile market situation.
Risk management is a vital aspect of every planning that goes into investing in variable sectors. Apart from reducing overall portfolio volatility, diversification would also help you achieve long-term portfolio performance in spite of varying market conditions. Your money in any kind of alternative investment would surely give you a long-term satisfaction about the security of your portfolio.
Coming back to the title of our article: ‘Is it time to look at alternative investments?’ The answer is an emphatic YES. In fact, the financial planners are suggesting newer means of alternative investment to the people having jitters over the current recession-like situation. A diverse portfolio is always advisable irrespective of whether the market situations are favourable for alternative or traditional investments. The only thing you must always be wary of is selecting right kind of investment for your portfolio, whether it’s alternative or traditional investments, after thorough professional evaluation of your finances and current and projected market conditions.
Marc Trimble was a commodities trader who now trades currencies. He represents one of the most innovative and successful currency trading strategies for institutions and individuals. To contact Mr. Trimble or to learn more visit www.TheArbitrageRoom.com.
Article Source:http://www.articlesbase.com/personal-finance-articles/is-it-time-to-look-at-alternative-investments-830820.html
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