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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.
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.
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.
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.
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.
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.
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.
