Alternative Investments You Should Know About

SUMMARY

Adding alternative investments to a portfolio can offer several benefits. One advantage is diversification. By including assets such as private equity, commodities, or real estate, investors can reduce risk and potentially enhance returns. Alternative investments tend to have low correlation with traditional assets like stocks and bonds, meaning they can perform differently under various market conditions. This can help balance out a portfolio and protect against volatility. Additionally, alternative investments often have the potential for higher returns compared to traditional investments. For example, venture capital investments in startups can yield significant profits if the company succeeds. Lastly, alternative investments can provide access to unique opportunities that may not be available in traditional markets. However, it is important for investors to carefully evaluate the risks and potential drawbacks before adding alternative investments to their portfolio.

Types of Alternative Investments

PRIVATE EQUITY

Investing in private equity involves purchasing shares of privately held companies that are not traded on public stock exchanges. Private equity investing offers the opportunity for investors to participate in the growth and success of these companies. However, it is important to note that private equity investments are typically long-term and illiquid, meaning they cannot be easily sold or traded. Additionally, private equity investments carry a higher level of risk compared to traditional stocks and bonds. Investors must carefully assess the potential risks and rewards before committing their capital. Due to the nature of private equity investments, they are often suitable for experienced investors with a higher risk tolerance and a longer investment horizon. It is advisable to consult with a financial advisor or conduct thorough research before embarking on private equity investing.

PRIVATE REAL ESTATE

Investing in private real estate can be a lucrative venture for individuals looking to diversify their investment portfolio. Private real estate investments offer the opportunity to generate passive income through rental yields and potential appreciation in property value over time. Additionally, investing in private real estate provides investors with more control over their investments compared to other publicly traded assets. However, it is important to carefully analyze and research potential properties before making any investment decisions. Factors such as location, market trends, and the condition of the property should be thoroughly evaluated to ensure a profitable investment. It is also advisable to seek professional guidance from real estate experts or financial advisors to navigate the complexities of private real estate investing. With the right approach and due diligence, investing in private real estate can yield substantial returns and contribute to long-term wealth accumulation.

HEDGE FUNDS

Investing in hedge funds can be a lucrative strategy for experienced investors looking to diversify their portfolios. Hedge funds are investment vehicles that pool funds from multiple investors to make investments in various financial instruments. These funds are managed by professional fund managers who aim to generate high returns while managing risk. Hedge funds often employ complex strategies, including long and short positions, derivatives, and leverage, to capitalize on market opportunities. However, it is important to note that investing in hedge funds carries certain risks, such as lack of transparency, higher fees, and potential for large losses. Therefore, it is crucial for investors to thoroughly research and understand the fund's strategy, track record, and risk management practices before making an investment decision.

COMMODITIES

Investing in commodities is a popular strategy for diversifying investment portfolios. Commodities, such as gold, oil, and agricultural products, offer unique opportunities due to their inherent value and global demand. By investing in commodities, investors can potentially benefit from price fluctuations and hedge against inflation. However, it is important to note that commodities can be volatile and affected by various factors such as geopolitical events, weather conditions, and supply and demand dynamics. Therefore, thorough research and analysis are crucial before making any investment decisions. Additionally, investors have the option to invest in commodities directly through futures contracts or indirectly through exchange-traded funds (ETFs) and mutual funds. Regardless of the approach, investing in commodities requires careful consideration and risk management to maximize potential returns.

COLLECTIBLES

Investing in collectibles can be an exciting and profitable venture. Collectibles, such as rare coins, stamps, artwork, wine, or vintage items, have the potential to increase in value over time. By carefully selecting and acquiring these items, investors can diversify their portfolio and potentially earn significant returns. However, it is important to thoroughly research and understand the market before making any investments. Factors such as rarity, condition, and demand can greatly impact the value of collectibles. Additionally, it is crucial to properly store and maintain these items to preserve their value. While investing in collectibles can be lucrative, it also requires patience, knowledge, and a long-term approach. Therefore, individuals interested in this form of investment should carefully consider their options and seek advice from experts in the field. Examples include:

• Rare wines

• Vintage cars

• Fine art

• Mint-condition toys

• Stamps

• Coins

• Baseball cards

IS IT FOR YOU?

Investors with a keen interest in diversifying their portfolio and aiming for potential higher returns may find alternative investments to be a suitable option. These investments, which differ from traditional stocks and bonds, encompass a wide range of assets such as private equity, real estate, hedge funds, commodities, and venture capital. While they can offer a higher risk profile, they also present unique opportunities for growth and income generation. Alternative investments are often favored by experienced investors who are willing to undertake thorough research and due diligence. Additionally, individuals with a longer investment horizon and the ability to withstand potential volatility can also benefit from including these assets in their portfolio. However, it is important to note that alternative investments may not be suitable for everyone, and consulting your Savvy advisor is recommended to assess one's individual financial goals and risk tolerance.

Investors should note the following regarding alternative investments:

• They are not subject to the same regulatory requirements as mutual funds, including mutual fund requirements to provide certain periodic and standardized pricing and valuation information to investors;

• They are speculative and involve a high degree of risk;

• Investors could lose all or a substantial amount of their investment;

• Interests may be illiquid and there may be significant restrictions in transfer. There is no secondary market for interests, and none is expected to develop;

• They may be leveraged, and their performance may be volatile;

• They have high fees and expenses that will reduce returns;

• They may involve complex tax structures;

• They may involve structures or strategies that may cause delays in important tax information being sent to investors;

• They and their managers/advisers may be subject to various conflicts of interest;

• They may hold concentrated positions with a limited number of investments;

• Only qualified investor can invest in alternative investments