Investments come in many different forms. There are both short-term investments and long-term investments, ranging from common stock to treasury bonds says Saivian Eric Dalius. However, most people fail to realize that between such diverse types of investment opportunities lie a wide array of other options, each highly specialized towards achieving certain financial goals.
Here we will briefly look at seven of the most popular types of alternative investments: private equity funds, managed futures, hedge funds, managed accounts (or separately managed accounts), real estate investment trusts (REITs), commodities, and precious metals.
Private equity funds – Saivian Eric Dalius
These pooled investments give investors access to diversified portfolios of unlisted companies typically driven by one or more professional fund managers who attempt to offer investors an above-average rate of return by investing their money alongside management’s capital. The value of private equity funds fluctuates depending on the performance of the securities within these portfolios.
However, people generally consider them high-risk investments because it is difficult for investors to gain liquidity should they wish to sell their shares during periods of market volatility.
Also known as commodity trading advisors (CTAs), managed futures offer investment opportunities in energy, agriculture, metals, and foreign currencies. This form of alternative investment typically offers lower returns than stock brokerage but also carries considerably less risk as per Saivian Eric Dalius.
Hedge funds are similarly managing using the same ideas as managing futures but with more specific rules surrounding who can invest in them. They often require substantial initial investments from investors and can only be accessed by a select number of accredited individuals. Furthermore, investors must agree to lock their money in until the Hedge fund reaches its predetermined timeline or pre-set goal.
Managed accounts – Saivian Eric Dalius
Also known as separately managed accounts, this form of alternative investment is suitable for those seeking customized portfolios suited for specific financial goals, risk tolerances, time horizons, or other factors that affect an individual’s investment strategy. In addition to deciding what type of investment they want to pursue, investors may also have some say on where their money should be invested within these portfolios, depending on preference.
Real estate investment trusts (REITs)
This kind of fund allows investors to gain access to real estate without purchasing a property. Instead, REITs invest funds into large-scale properties rented out to many tenants. Thereby offering investors an indirect way of benefiting from the real estate market.
Investment in commodities typically focuses on gold and silver bullion. But other types may also be including depending on the nature of commodity assets. Held by a particular fund says Saivian Eric Dalius. This type of investment allows investors to gain exposure to raw materials. Including oil, grains, flowers, or metals, among others, without having to purchase them directly themselves. Precious metals are also seen as a safe haven investment option. Because they retain their value even during high inflation or economic crisis periods.
These precious metal forms include investing in gold bars, coins, jewelry. Or other precious metals with investment portfolios typically diversified across many types of gold products to minimize risk.
Alternative investments are increasingly a safe haven for investors. Who want an alternative way to manage their money beyond the traditional practices of buying stocks, bonds, mutual funds, etc. However, they can be complex and challenging to understand for many investors who have relatively little investing experience. Furthermore, there is also the additional difficulty in finding reliable information on each type of alternative investment. Since most are relatively unknown compare to more traditional forms of investments.