Alternative Investments

What are alternative investments?

Alternative investments are defined as financial assets that do not belong in the traditional investment class (stocks, bonds, etc.). As the name implies, alternatives are often chosen by investors as a substitute to traditional investments to expand the range of their portfolio allocation. Examples of alternative investments include those in the below diagram. A possibility is that of these alternative assets, cryptocurrencies may soon reach a point where they are no longer considered alternative investments due to predicted mass adoption under the newly elected Trump administration.  

Why do people invest in alternatives?

We asked the custom ‘Investing AI’ GPT on ChatGPT about which factors are driving the popularity and interest in alternative investments, and got the following response:  

1. Portfolio Diversification

2. Low correlation to public markets

3. High return potential

4. Inflation hedging

5. Unique investment opportunities

While the risk and return of alternative investments differ from person to person depending on the investor’s strategy and personal financial goals, many investors are beginning to make alternative investments for the reasons listed above.  

Despite this, because traditional assets are “investment products that reflect mass trends and are the greatest common denominator of the public market”, it is also possible to think of alternatives as providing a “diversification of possibilities” towards a wider range of investments.

Around the world, the popularity of alternative investments as a substitute for investing in just traditional assets is increasing. Investment products are becoming more diverse, and the number and size of investors is increasing.  

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