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Why Alternative Investments should be part of your portfolio?

Introduction

Making sure your money is working hard for your future is a crucial part of any investment strategy today.

While traditional investments in bonds, stocks and shares are what most are familiar with, today there are several alternative investments that provide new opportunities for any investor.

There is a range of alternative investments available, some, such as Forex or CFDs, are familiar to most investors, while others, such as property, fine wine, artwork or precious metals, require specialized understanding to be successful.

As alternative investments, they do present risks, with the possibility of losing more than your starting balance. However, here are 7 things to consider about Alternative Investments.

1. Diversification

Stock markets are underperforming, and politically driven uncertainty around the world is exacerbating that weakness, and that creates uncertainty for your investments.

By looking at alternative investments, they add the ability to offset that poor performance, and even potential losses.

If your entire portfolio is held within the stock market, and they crash, then you a have a problem. However, if a portion of your funds is held in alternative investments that are not affected by such a crash, or even go up because of it, then while the situation is not ideal, it will be a lot less painful.

An alternative investment then is simply a vehicle for investment that offers an alternative way to make a profit from your assets.  

Alternative Investments

While the stock market is largely a known quantity, alternative investments can bring greater risk, and this must always be considered. 

Think about the hype that surrounding Bitcoin just a year or so ago, then look at the price today.

However, balancing risk and reward should be an integral part of your investment strategy, and while there are risks with all investments, many alternative options provide an excellent way to compliment your existing portfolio.



 

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2. Complement existing portfolio's

When looking at alternative investments, the idea is to find asset classes that complement existing investment strategies.

That means offering ways to earn profits when existing positions are struggling.

Many alternative investments, such as property, are intrinsically tied to the economy and will reflect stock market behaviour to a greater or lesser extent.

That is, when the markets rise, they do too, when they fall, these alternative assets tend to fall too.

In some cases, such as CFDs, the ability to profit from a falling market is a great way to offset those falling values through short positions, but that is not the only option.

Some investments, such as the Forex currency markets, don’t follow stock market trends. If the market is falling, somewhere a currency price will be going the other way.

Alternative Asset Allocation

 

By choosing alternative investments carefully, you can find ways to be making a profit on your money even when stock markets are struggling.

This allows you to maintain your portfolio, and possibly even grow it when others are having problems. As we face ever more political turmoil around the world, the necessity of this is more urgent than ever.

3. Managed Solutions work for you

When looking at vehicles for alternative investments, one important thing to consider is how those investments will be integrated into your existing strategy.

 

For instance, an investment in cryptocurrency is hands-on, you need to fully grasp the market, the process of buying the currency and so on, and then effectively manage it. 

It is a similar story for physical assets such as art, precious metals and so on. If you have the time and skills, then this is a great option, but for many, the time investment alone makes it impractical.

The alternative is a managed investment, here professionals manage your funds and ensure you have the best chance of seeing profits, however, this approach can be expensive.

Managed property investments, for instance, require a significant investment, to begin with, however, there are some that provide a relatively low-cost entry and a managed approach that lets your money work for you without extensive input.

Two, in particular, have proven to offer an accessible opportunity for investors are Forex, which involves trading the variations in currency prices across the world, and CFDs.

CFD stands for Contracts for Difference, and they are a derivative that allows a leveraged position to be taken in the market. Crucially CFDs allow investors to profit from both rising and falling markets, making them a great platform for offsetting risk on your stock investments.

For this reason, managed Forex and CFD investments are a standout approach to adding value to your portfolio and mitigating investment risk over time.

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4. Help to grow your portfolio

As stock markets falter, return on investment has fallen, and this has led many to look for ways to supplement that investment and increase profits. 

Alternative investments often have the potential for a higher rate of return, which can in the long-term boost overall portfolio performance even when the stock market itself is performing poorly. 

Many alternative investments have previously only been available to institutional investors and the very wealthy, but today investors of all types do have choices.

However, with that added profit potential the risks increase too. Maintaining a balance between the risk and reward is essential, and some alternative investments provide an easily managed solution to this.

Leveraged products, such as Forex and CFDs, are investments where losses can exceed the initial investment.

Forex as an Alternative Investment

 

However, they do also offer the potential for much greater profitability too. A managed Forex and CFD solution can mitigate risk and provides a clear opportunity for returns.

5. Increase your profit potential

Successful investment is all about balancing risk and reward. By adding forex and CFD investments the potential for reward is increased.

The risk also goes up, of course, however, it remains relatively balanced. Forex is the largest market in the world, with 24-hour trading volumes that dwarf stock or future markets.

Forex, in particular, brings increased liquidity, allowing positions to be entered and existed easily and quickly.

For many traders, the ability to get out of a position any time you like, 24 hours a day for 5 days a week transforms how they see investments.

In general, the number of forex pairs and their nature, combined with that liquidity, means that in general, Forex offers more chances to make a profitable trade than all other markets.

Although every trade brings risks, there is more potential for profit within such a liquid platform, allowing investors the chance to increase returns on their portfolio over time with a successful strategy.

CFDs, while not offering the vastly increased liquidity of Forex, do provide the ability to short sell the market.

This allows investors to hedge against potential losses within their stock portfolio, especially important in an uncertain market.

Hedging is commonly used by institutional traders to protect their investments and involves taking multiple positions in several markets, whereby if the market goes against you in one position, it is moving with you in another.

6. Balance risk and reward

When expanding your portfolio, using assets that don’t require a large investment up front can make such a move viable.

In many cases, alternative investments often require significant funding, but with both Forex and CFDs, the initial cost remains relatively low.

In both cases, a managed account requires a relatively small investment, both in terms of money and time. The reason both are accessible with small investments is that they are leveraged products.

That means you can control larger assets in the market than your initial investment. You also gain the profits of those larger assets when positions go your way. The flip side of that is that you also receive the larger losses of those assets when things go against you. That is, you can lose more than you put in.

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As ever, balancing that risk and reward scenario is crucial, and trading with either Forex or CFDs needs an effective strategy to maintain profitability.

But as long as the approach is sound, these markets can provide exceptional results for traders of all kinds, and the accessibility makes them a very useful option for any investor.

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7. Managed CFD and Forex Alternative investment

While there are many opportunities available to investors looking for alternative investment, many require significant investment, specialized knowledge or other skills.

 

In terms of an investment that requires a relatively small investment, a balanced risk profile and that is easily accessible for investors, a managed Forex and CFD approach has a lot to offer.

 

With all the advantages of alternative investments, the ability to mitigate potential risk from the stock market while also adding value to overall portfolio performance, this approach allows an investor to diversify in a way that professional investors have long since recognized as desirable.

Here are the steps to get started:

1. Schedule an appointment (Conference Call) with an Investment Manager

2. Submit a Managed Discretionary Account (MDA) application with Walker Capital Australia.

3. Open a trading account with the Walker Capital Australia’s executing broker.

4. Select from our range of investment strategies and choose your asset allocation between the choices of accounts.

5. Once all accounts are opened, and funds have been chosen, our team gets to work and begins trading.

 

We welcome you to give our team a call to discuss your investment goals and objectives.

You can call Walker Capital Australia on +61 2 8076 2210, and we’ll see how we can help you achieve your investment goals.