Alternative Investments

In 2023, global economies are more correlated than ever, making it difficult to rely solely on buying traditional investments such as stocks and bonds to build a diversified portfolio. Investors are searching for uncorrelated alternative investments to offset numerous market risks.

Because alternatives tend to behave independently from stocks and bonds, adding them to your portfolio can offer scope, broader diversification, and the potential to reduce risk and enhance returns.

Thoughtful alternative investment selection requires a focus on an investor’s goals and financial risk tolerance. By taking these considerations into account, investors can make more informed decisions regarding the role of alternatives in their portfolios.

Benefits of Alternative Investments

Income

Investors have varying needs for dependable current income, whether to meet monthly expenses or achieve long-term financial goals. Especially during periods of low interest rates, some alternatives may offer higher yields than traditional investments.

Diversification

A diversified investment portfolio that includes stocks, bonds, and alternatives can help smooth the impact of market volatility and may generate higher returns relative to their levels of risk over time. Many alternative investments tend to have lower correlations to traditional investments.

As a result, they can potentially reduce overall portfolio volatility and help mitigate extreme swings in investor sentiment that too often lead to poor investment decisions.

Uncorrelated Growth

Alternative investments have the potential to improve the risk-adjusted return profile of your portfolio. Heading into 2021, investors are searching for ways to diversify their portfolios in a challenging investment environment dictated by the Federal Reserve and Treasury.

Investing in alternatives can provide uncorrelated returns and access to a broader set of investments and strategies beyond traditional investments, which may help grow an investor’s total return.