Alternative investment
Investopedia Financial Dictionary:
Top
Alternative Investment
An investment that is not one of the three traditional asset types (stocks, bonds and cash). Most alternative investment assets are held by institutional investors or accredited, high-net-worth individuals because of their complex nature, limited regulations and relative lack of liquidity. Alternative investments include hedge funds, managed futures, real estate, commodities and derivatives contracts.
Investopedia Says:
Many alternative investments also have high minimum investments and fee structures compared to mutual funds and ETFs. While they are subject to less regulation, they also have less opportunity to publish verifiable performance data and advertise to potential investors.
Alternative investments are favored mainly because their returns have a low correlation with those of standard asset classes. Because of this, many large institutional funds such as pensions and private endowments have begun to allocate a small portion (typically less than 10%) of their portfolios to alternative investments such as hedge funds.
While the small investor may be shut out of some alternative investment opportunities, real estate and commodities such as precious metals are widely available.
Related Links:
If you fail to uncork profits in this market, you can always toast your loss. Investing In Fine Wine
These investments can add a new level of diversification to your portoflio. Alternative Assets For Average Investors
Using the same strategy year after year may be comfortable, but it's not always profitable. Investing "Road Less Traveled" May Lead To Riches
Interested in non-traditional investing? Make sure you follow the rules to avoid prohibited transactions. IRA Assets And Alternative Investments
If you stray off the beaten path when investing your IRA assets, you'll find new potential pitfalls and rewards. Alternative Investments In Your IRA
Find out what problems arise for reps when they start to diversify their client offerings. Should You Offer Alternative Investments?
Wikipedia on Answers.com:
Top
Alternative investment
An alternative investment is an investment product other than the traditional investments of stocks, bonds, cash, or property. The term is a relatively loose one and includes tangible assets such as art, wine, antiques, coins, or stamps[1] and some financial assets such as commodities, private equity, hedge funds, venture capital, film production[2] and financial derivatives.
|
Contents
|
Research
There is a wide variety of literature on alternative investments; however, this term has been used broadly and can also be used to refer to financial alternatives such as derivatives or other alternatives such as energy. It is difficult to find research on the investment characteristics of tangible alternatives such as art or wine due primarily to a lack of good quality data. The Goizueta Business School at Emory University has established the Emory Center for Alternative Investments to provide research and a forum for discussion regarding private equity, hedge fund, and venture capital investments.
Investors
The Merrill Lynch/Cap Gemini Ernst & Young World Wealth Report 2003, based on 2002 data, showed high net worth individuals, as defined in the report, to have 10% of their financial assets in alternative investments. For the purposes of the report, alternative investments included "structured products, luxury valuables and collectibles, hedge funds, managed futures, and precious metals".[3] By 2007, this had reduced to 9%.[4] No recommendations were made in either report about the amount of money investors should place in alternative investments.
Characteristics
Alternative investments are sometimes used as a tool to reduce overall investment risk through diversification.
Some of the characteristics of alternative investments may include:
- Low correlation with traditional financial investments such as stocks and shares
- Alternative investments may be relatively illiquid
- It may be difficult to determine the current market value of the asset
- There may be limited historical risk and return data
- A high degree of investment analysis may be required before buying
- Costs of purchase and sale may be relatively high
See also
References
- ^ First class returns for alternative investments by John Greenwood The Telegraph, 6 October 2008. Retrieved 29 October 2011. Archived here.
- ^ Investing In The Big Screen Can Be A Profitable Story by Shelly Schwartz CNBC, 18 October 2010. Retrieved 29 October 2011. Archived here.
- ^ Merrill Lynch/Cap Gemini Ernst & Young World Wealth Report 2003, p.12. Retrieved 28 March 2010.
- ^ Cap Gemini Merrill Lynch World Wealth Report 2008, p.14. Retrieved 28 March 2010.
Further reading
- Financial Instruments: Equities, Debt, Derivatives and Alternative Investments by David M. Weiss, Portfolio, 2009. ISBN 1-59184-227-1
- How To Invest In Stamps And Coins, Quick Easy Guides, 2008. ISBN 1-60620-661-3
- Portfolio Diversification benefits of Investing in Stamps by Chris Veld, University of Stirling. (Incomplete first draft)
| This article about investment is a stub. You can help Wikipedia by expanding it. |
This entry is from Wikipedia, the leading user-contributed encyclopedia. It may not have been reviewed by professional editors (see full disclaimer)
Post a question - any question - to the WikiAnswers community:
Copyrights:
Investopedia Financial Dictionary
Copyright ©2010, Investopedia.com - Owned and Operated by Investopedia US, A Division of ValueClick, Inc. All rights reserved.
Read more
Mentioned in
Opportunity Cost
(business term)
UMB Financial Corporation
(Public Company)
Asset Alliance Corporation
(Private Company)
State Street Corporation
(Public Company)
» More