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Alternative investments can be a crucial part of your overall investment strategy, providing opportunities for growth even if traditional investments are struggling.
With options that include leveraged assets that allow the potential for greater profitability for a given investment, there are also additional risks to think about too.
Those leveraged positions also mean that losses can exceed the initial investment. With that in mind, a managed solution, that balances the risk and reward for you and leverages the skill and market knowledge of specialists to provide returns, offers a popular option for those looking to take full advantage of alternative investments.
However, with the risk involved being greater, choosing the right alternative investment fund, and the management firm to control it for
With a wide choice of alternative investment options that represent an array of different risk models and investment requirements, there are options to balance risk and reward to every investor’s preferences, but the primary choice really is the alternative investment management firm chosen.
As with any managed investment, the performance of the alternative investment management firm is crucial. You want a return on your investment, so finding a company that has a track record of success is a good starting point.
However, because alternative investments cover such a broad range of investment levels and overall risk levels, it needs more scrutiny than finding the licensed management company that has the best history of returns.
Risk levels matter, some alternative investments may come with risk levels that you are simply not comfortable with. You may look at historical returns and see good success, however, if that is achieved in higher risk markets, then there is also a higher risk of failure in the future.
Always remember, while we can only judge performance on a historical basis, it does not guarantee the same performance in the future. That means paying close attention to the kind of alternative investments on offer, and the situation we face in the medium term that these investments should guard against.
As trade is disrupted by political actions the potential for a stock market stagnation or fall increases. Some alternative investments, such as property funds, are not necessarily the ideal solution in this situation.
Recessions caused by such trade and stock market falls will directly impact returns on property, as such, they have the potential to suffer in the same way as stock investments.
Others, such as CFD or Forex, that can profit from falling markets, mean that there is growth potential in conditions where your stock portfolio is underperforming, exactly what is needed right now. Finding an investment management firm that has the right alternative investments is an important part of the process.
Finally, the approach of the alternative investment firm is an important consideration. The kind of managed investments being offered matters as mentioned, but there is more to risk than that.
Whether they can tailor the strategy to match a risk profile you are comfortable with is also something to look out for. Forex or CFD accounts are leveraged to generate greater potential profits, and also increase potential losses, an alternative investment management firm that offers this with varying risk profiles enables each investor to find the answers for their needs.
For the full breakdown on why Australians should invest in Alternative Investments, check out our article: Why Alternative investments should be part of your portfolio?
