How Alternative Investments Can Help With Portfolio Diversification

Depending on your current asset mix and long-term goals, adding alternative investments to your portfolio could help you access new areas of the market.

If you’re considering adding alternatives to your portfolio, knowing the risks and benefits can help you decide if they’re right for you.

The Importance of Portfolio Diversification

Portfolio diversification can be a helpful way to mitigate risk and protect against volatility. Since alternatives generally exhibit little to no correlation to traditional equity and fixed income markets, they can be a solid option for those looking to diversify. Due to their potential for above-average yield, they can also help to ease some of the pressure associated with more traditional investment vehicles. 

Alternative investments can provide some unique benefits in a long-term investment portfolio. These include enhanced diversification, the potential for higher returns, non-traditional sources of portfolio income, and possible tax advantages.

Alternative Investments Include:

Private equity offerings

Private Credit

Real estate private placements

Non-traded closed-end funds

1031 exchanges

Non-traded business development companies

Non-traded real estate investment trusts

Managed futures funds & Commodities

By Irene Huhulea