TO THE STOCK MARKET
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There are a number of alternative
investments that can be made - What Are They?
Alternative investments are those investments that do not involve
stocks and bonds. They are an alternative to the volatility of the
market and an opportunity to have a greater return. They do not have a
connection to the markets and the investor does not have as much risk.
One method of alternative investment is called Venture Capital.
Venture Capital is the process of investing in a company that is just
starting out and is seen as having the potential to grow substantially
over time. The goal is to generate high rates of return over long
periods of time. It offers investors better financial returns than
stocks, but requires longer period of time to see any return at all.
This is because the new company needs time to build up its clientele
and thus its profits.
You can also invest in real estate, which is another form of
alternative investment. You can do this by buying homes and selling
them at a higher price. This works particularly well if you can buy a
house for a rock bottom price, do some alterations and sell it at a
tidy profit for your self. Again, this does not happen overnight. You
have to carefully search the market when buying and selling to be sure
you are getting the best deals. This may mean having to wait for the
right opportunity to sell.
You can invest in many different things. Even collector's items are
a great alternative investment. Items such as rare comics area hot
commodity right now, as are certain kinds of trading cards. This is a
risk, because you only make a profit if you find a buyer who is
willing to pay your price.
Private equity and hedge funds are the most popular forms of
alternative investment. Hedge funds pool investors' money and invest
the funds in financial institutions. They are not registered and seek
profits in all sorts of investments that can make money.
Whatever type of investment you choose, you must be aware that
there is always a risk of losing your money, but this risk is minimal
with the possibility of large returns on your investment.
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of alternative investments such as hedge
funds and managed
with choices of instruments and markets
characteristics tend to attract some of the most talented money
managers, and some of the most savvy investors, to alternative
investments, such as hedge funds and managed futures generally are
distinguished from traditional investments by their regulatory
structure, high minimum investment requirements, incentive-fee
compensation and the diversity of financial instruments and strategies
they employ in pursuit of profit.
poor recent performance of traditional asset classes has prompted many
investors-including high net worth individuals, corporations,
endowments, trusts and institutions such as General Motors and
Princeton University-to turn to alternative investment strategies to
balance their investment portfolios and attempt to increase returns in
a variety of market conditions.
during a period of such uncertainty, are so many investors increasing
their commitments to alternative investments?
are seeking strategies that will improve the overall return on their
portfolios without exposing them to undue risk.
know that: Unlike
traditional investments, alternative investments' performance is not
dependent on a bull market environment. In fact, some alternative
investment strategies have historically produced strong gains during
down market environments.
Stocks offer greater liquidity and transparency than alternative
investment products noted and may be less costly to purchase.
past performance is not necessarily indicative of future results, an
allocation to alternative investments, such as hedge funds and managed
futures, may greatly affect a portfolio 's overall ability to preserve
capital and grow wealth.
[hedge funds] can provide much-needed diversification and reduce risk
by investing in niche areas such as private equity, commodities, and
risk arbitrage or, most important, by shorting stocks-something that
typical mutual fund, by law are restricted from doing."*
Vickers, with Debra Sparks and Heather Timmons "Hedge Funds Are
Hot Again," BusinessWeek Online, 26 February 2001
law requires that managers determine investors' suitability before
showing them specific products.
Alternative investment products, including hedge funds and managed
futures, involve a high degree of risk, often engage in leveraging and
other speculative investment practices that may increase the risk of
investment loss, can be highly illiquid, are not required to provide
periodic pricing or valuation information to investors, may involve
complex tax structures and delays in distributing important tax
information, are not subject to the same regulatory requirements as
mutual funds, often charge high fees which may offset any trading
profits, and in many cases the underlying investments are not
transparent and are known only to the investment manager. Alternative
investment performance can be volatile. An investor could lose all or
a substantial amount of his or her investment. Often, alternative
investment fund and account managers have total trading authority over
their funds or accounts; the use of a single advisor applying
generally similar trading programs could mean lack of diversification
and, consequently, higher risk.
is often no secondary market for an investor's interest in alternative
investments, and none is expected to develop. There may be
restrictions on transferring interests in any alternative investment.
Alternative investment products often execute a substantial portion of
their trades on non-U.S. exchanges. Investing in foreign markets may
entail risks that differ from those associated with investments in
U.S. markets. Additionally, alternative investments often entail
commodity trading, which involves substantial risk of loss.
material and any views expressed herein are provided for information
purposes only and should not be construed in any way as an endorsement
or inducement to invest in any specific program. Before investing in
any program, you must obtain, read and examine thoroughly its
disclosure document or offering memorandum.