An alternative investment is any investment that does not fall into the traditional categories of stocks, bonds, or cash.
In other words, while traditional investments include things like publicly traded shares or government bonds, alternative investments are assets that often behave differently from those markets and can offer diversification benefits.
🧩 Common Types of Alternative Investments
- Real Estate – Property investments, REITs (Real Estate Investment Trusts)
- Private Equity – Investing in private companies (not listed on the stock exchange)
- Hedge Funds – Pooled funds using complex strategies to achieve high returns
- Commodities – Gold, oil, agricultural products, etc.
- Venture Capital – Investing in early-stage startups
- Collectibles – Art, wine, antiques, rare coins, or cars
- Infrastructure – Investments in roads, bridges, utilities, etc.
- Cryptocurrencies – Bitcoin, Ethereum, and other digital assets
💡 Key Features
- Less regulated than traditional markets
- Illiquid — harder to buy and sell quickly
- Higher risk, but often with potentially higher returns
- Low correlation with stock/bond markets — useful for portfolio diversification
📊 Example
If an investor has 70% in stocks, 20% in bonds, and 10% in real estate (an alternative), the real estate can help reduce overall risk if the stock market declines.
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