Alternative Investments Guidance

By: Dave Brown.

What has your investment performance been lately? Unless you are part of the small few that saw the financial crisis coming then your investments are likely to have done poorly. Many others are in a similar situation and they are seeking alternative investments for wealth preservation.

The main reason why many individuals are looking at alternative investments is because the returns have a low correlation against other traditional assets. This means that when we have financial events like we have had recently, your entire wealth doesn't take a hit. There is a level of further diversification in there which helps to protect you.

You need to diversify in alternative investments because of traditional assets have performed so badly. Shares haven't performed well and if you look at it from a decade long view the performance is dire. Property is not as safe as houses anymore and cash is losing real value all the time. Now is the point when you need alternatives.

I am not saying that you investing in alternative investments is always a good thing. You just need to be open to the idea. Investments in stamps, art, antiques and other collectables have some disadvantages which we will go through now.

The biggest disadvantage is the stock market's big advantage... liquidity. It can be risky investing in a market with a lack of liquidity because even though the asset might have risen in value you may not be able to sell and lock in the profits when you want. If there are no buyers around then you might not be able to sell.

A further disadvantage of alternative investments is the lack of data required to establish a price. The marketplace is not big so it is difficult for a fair value to be established. If you are the person who hasn't got all the information available to you then you are likely to be on the wrong end of the deal. That said, if you were to learn a little about the market then there are huge profits to be made.

Article Source: http://yourfinance.co.za

About The Author
Are you keen to find out more information on alternative investments strategies? Well you can find out more by going to Dave's blog. There you will find all benefits and negatives of making alternative investments.