Alternative Investments are ones that don’t fall within the traditional nomenclature of equities, bonds and cash.
Historically they have been dominated by property-based investments, which typically generate a higher income and are influenced by interest rate movements but also exhibit long term capital growth.
A Diverse Asset Class
This asset class has grown in recent years as investors anticipated an end to lower interest rates. Also as equity markets have become sector dominated, technology being the prime example, alternatives cast the net wider still.
Gold Still A Good Hedge
Historically one of the great “hedges”, or means of investing away from the bond and equity markets, has been gold. Regarded through time as a “store of value” its price has ebbed and flowed but, critically, that volatility has been independent of conventional investments and with investors facing geopolitical turmoil and rising inflation gold is enjoying a resurgence.
Currency Investing
Driven by trade flows, GDP growth, inflation, interest rates, speculation and investor sentiment, currencies can swing back and forth, sometimes markedly. However, they tend to revert to “fair value”, the level determined by international demand for the currency based on trade flows and their relative attractiveness compared to other international currencies. Their cycles are independent of bond and equity markets and offer the potential for uncorrelated returns.
Derivatives
Another area of the investment market is the world of “derivatives”, financial instruments such as futures and options that “derive” their performance from an underlying asset but allow investors to profit from either a rise or a fall in the price of the “underlying”, be it an index, an equity, bond, currency or commodity.
Such strategies can be effectively combined to generate long term returns and enhance diversification. Alternative Investments help us to navigate potentially choppy waters and maintain a good balance of diversification in volatile markets.
To further diversify your portfolio with alternative investments, weighted accordingly to your risk tolerance, talk to one of our FCA authorised wealth managers by arranging a Discovery Call [Here]
This article is for informational purpose only. It does not constitute finacial, tax or legal advice, nor is it a recommendation to buy, sell or hold any investment. Past performance is not a guide to the future, investments rise and fall so investors could make a loss. No view is given on the present, future value or price of any investment and investors should form their own view on any proposed investment.