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A British 1 shilling embossed stamp, typical of the type included in an investment portfolio of stamps.

An alternative investment is an investment product other than traditional investments such as stocks, bonds, cash or property. The term is most commonly used to describe investments in tangible assets such as Art, Wine, Antiques, Coins or Stamps[1] but may include some financial assets such as commodities. Private equity and hedge funds are also sometimes called alternative investments and the term is a relatively loose one.

Contents

Characteristics

Alternative investments are sometimes used as a tool to reduce overall investment risk through diversification.

Some of the characteristics of alternative investments may include:

  • Low correlation with traditional financial investments such as stocks and shares.
  • Alternative investments may be relatively illiquid.
  • It may be difficult to determine the current market value of the asset.
  • There may be limited historical risk and return data.
  • A high degree of investment analysis may be required before buying.
  • Costs of purchase and sale may be relatively high.

References

  1. ^ "First class returns for alternative investments" by John Greenwood in The Telegraph, 6 October 2008.

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