Alternative Investment

An alternative investment is an investment in an asset that is not conventional. Examples of conventional investments are bonds, cash, and shares. Alternative investments may include real estate, private equity, hedge funds, financial derivatives, investing in energy and metals etc. Alternative investments are different from conventional investment so adding them to a portfolio may provide broader portfolio diversification, better risk management and enhance the returns.

Some characteristics of alternative investments are:

• They have low correlation with standard assets classes, which make them suitable for portfolio diversification.

• Alternative investments may be relatively illiquid.

• It may be difficult to determine the current market value of assets.

• Alternative investments held over a long period of time may result in tax benefits.

• Alternative investment may have high initial investment or transaction cost.