By most any definition, alternative investments are simply anything different from traditional offerings. This includes non-traditional strategies like real estate investments, commodities, currencies and collectibles.
When we look at the investment industry, we’ve generally had three asset classes to work with — equities, real estate and fixed income — and all three have won out over the past 35 years because we’ve had a declining interest rate environment. – Som Seif, President of Purpose Investments Inc.
In past years, the market’s most attractive alternative investments have been repeatedly applauded for their diversification benefits and steady returns. Adding to their increasing appeal, many investors feel that they are a much more secure investment, given that they are uncorrelated to stocks and bonds.
Although it sounds like a wonderful investing strategy for most anyone, in the past many of these opportunities have been a secret investment that held a big price tag and, more often than not; were limited to institutional and/or accredited, high-net-worth investors. Thankfully this is changing.
Nowadays, savvy, confident investors are enjoying access to a new wave of more affordable alternative investments. This has been instrumental in encouraging investment-seekers to introduce alternatives to their portfolio, and to distance themselves from the volatility of the stock, bond and currency markets.
In recent months I for one have been approached by several investment brokers, whose entire list of offerings is comprised of nothing but alternative investments. Their list of non-traditional opportunities range from commercial real estate and shipping container investments, to precious metal and gemstone investing. None of which I am particularly knowledgeable about. In fact, therein lies much of my apprehension about alternatives.
All things considered, if investors hope to discover where alternatives fit in their portfolio, they must either conduct their own in-depth research or rely upon the information provided to them by their brokers and/or advisers. In either case, I recommend that investment-seekers do as I have done, and educate themselves on:
- the investment provider,
- past and present market performance, and
- credible forecasts for the future.
Given that these new alternatives have presented new challenges for investors, the only way to profit from these new, highly profitable opportunities is to educate yourself, and make informed decisions based on established facts and figures.
For example, although the global shipping industry appears to be facing its share of challenges for the next couple of years, much of the world’s real estate market is doing well and gemstones have shown to retain (and steadily increase) their value. I’m still not sold on precious metals either. That will require further study.
All in all, my confidence in alternative investments is high. I see a lot of potential for great, low-risk returns in the coming years, and I have adopted a non-traditional investing strategy to reflect that.