In answer to the question of what are alternative investments, it can be said that they are investments made in an asset other than stocks, bonds, cash and cash equivalents. Investments made using the necessary knowledge and experience and alternative investments can be a good step for the future. At this point, first of all, the question of what are alternative investments should be answered.
What Are Alternative Investments?
Private Equity
Private equity investment is known as investments in companies that are not publicly traded. An investment can be made directly on a company.
Venture Capital
Venture capital can be defined as a sub-stage of private equity investment. The most well-known difference between the two investments is that private equity investment is an investment made on private businesses that have reached a certain size. Venture capital, on the other hand, turns to new companies with growth potential. For this reason, venture capital carries a significant risk compared to other alternative investment types.
Hedge Funds
Hedge funds are known as investments made with the goal of maximizing revenues. It is allocated to high-risk assets. It is based on investing in assets such as stocks, commodities to generate the highest income. As with venture capital, hedge funds are known as a high-risk alternative investment type.
And the last alternative investments instrument commodities
Precious metals are included in the investment group known as commodities. Examples of precious metals are pieces such as gold and silver. It carries a higher risk ratio compared to traditional investments. However, when compared to stocks, it is seen to have a lower risk ratio.
What is Portfolio Diversification? Why is it Done?
Turning to portfolio diversification is a good move to reduce risk when investing. Investments, which we refer to as alternatives investments, play an important role in portfolio diversification. They are known to have the potential to increase portfolio revenues. Alternative investments provide access to resources that are not traded in the stock and bond markets. For this reason, it is a method often preferred by investors.
Alternative investments have advantages as well as disadvantages. One of their disadvantages is that they are more complex than other assets. Before turning to alternative investments, it is necessary to have knowledge and experience. At this point, working with a financial expert would be a good choice for risk management.
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