What it is
Alternative investments are financial assets that are seen as unconventional because they differ from traditional investments such as stocks, bonds, and cash and cash equivalents.
There are no universal standards for what makes something an alternative investment. Examples typically include private equity, precious jewels, and art and collectibles.
What it means for you
People might choose alternative investments to explore new opportunities to grow their money. Some investors may also consider these options when diversifying their portfolio.
The prices of alternative investments often have a low correlation with the performance of stocks and bonds. They might offer some protection in case of a downturn in the traditional financial markets.
Before putting money in alternative investments, it’s best to weigh the pros and cons while considering your situation and risk tolerance. Some types may have low liquidity, which means they can be harder to buy and sell.
It can also be a challenge to determine a fair value for certain alternative investments. Unlike traditional investments, the trading of alternative assets tends to be less regulated and so they might be prone to scams.
Their prices may change drastically due to emotional and other factors instead of intrinsic value. As with any form of investment, it's important to understand what you're getting into before dealing in these alternative products.
