Alternative investments or Alternatives are different from your conventional investments (cash, equities and bonds).
What they include
Alternatives are wide-ranging and include commodities (e.g. grain, oil and gas), derivatives, hedge funds and tangible assets like precious metals, rare coins, wine, art and antiques.
For diversification
Alternative investments tend not to move in tandem with conventional investments and are said to have lower correlations with equity and bond markets.
Which is why sophisticated investors often include them in their portfolios for greater diversification.
A good alternative?
Alternative investments are not for everyone. They tend to be more complex (e.g. derivatives), less liquid (e.g. art), difficult to value (e.g. rare coins). Some alternative investments require a larger amount of initial outlay compared to traditional mutual funds.
Speak to your financial adviser to find out if alternative investments have a place in your portfolio.
