Member-only story
What Are Alternative Investments And Should I Hold Any?
Saving cash in money markets or CDs, and investing in the stock market via stocks and bonds through 401(k)s or IRAs are where many of us start when looking to grow our money beyond a simple savings account.
As we continue to look for ways to build our wealth and secure our financial house we hear advice about diversifying into other asset classes or alternative investments. But what qualifies as an alternative investment? Are they safe?
Alternative Investments, What Are They?
An easy way to start with what they are is to understand what they are not.
Alternative investments are a wide range of assets not categorized as one of the three traditional investment types — cash/cash equivalents, stocks (equities), or bonds.
Most alternative investments are considered ‘illiquid assets’ as compared to the traditional asset classes — because they are more difficult or take more time to sell.
The variety of alternative investments available is vast, as is the complexity, challenges, and potential risks they may come with. Yet, they are not all regulated as tightly as traditional investments. Below we list many examples of alternative investments.