Thursday, 28 March 2013
Alternative Investing Continues to Find a Place in Portfolios
What some investors may find interesting to look at is the trend that has developed in the investment marketplace, with regards to the ratio between traditional and alternative options that are being considered/included in investor's portfolios. The fact of the matter is that there are two fundamental investment directions an investor can choose from. Either the traditional options such as stocks, bonds, cash and real estate or the alternative options that are tangible and include antiques, precious metals and gemstones, rare coins, fine art, stamps and even shipping containers. Other alternative investing options include commodities, hedge funds, venture capital and timber, as well.
In the 1990’s, the majority of global financial investment portfolios contained less than 5 percent of alternative options. In the first decade of this 21st century, that number rose to approximately 10 percent. Currently, most global financial firms believe it is best to have between 20 and 30 percent alternatives, in order to enjoy great investment rewards and maintain a well-balanced portfolio. The reason for this is that profitable alternative options are seen in the industry as a safeguard against poorly performing stocks, that may drag down the overall value of the investment. In light of this fact, there are a growing number of analysts who believe that this trend will continue and could end up with the average portfolio containing a 50-50 split, between alternatives and traditional investment options.
Nowadays, there are many speciality alternative investment firms operating in the marketplace and that number is expected to continue growing. One of the most common reasons for their rise in popularity, is that alternatives investments are not directly correlated with the stock markets and are therefore less likely to be negatively affected by inflation. Because many of the traditional approaches to investing cannot perform at this level, members of the investment-community have begun to regard them as high risk investments and are turning their back on them.