Why Do Investors Seek Out For Alternative Investments?
Over the years, alternative investments have emerged as an
avenue to generate more earnings, while being exposed to limited
risks. However, several other reasons add up to their
Nonetheless, to align investments with requirements, investors
must make it a point to become familiar with the pros and cons
of alternative investment tools. Doing so will prove useful in
ascertaining the reason why more individuals are gravitating
What Is An Alternative Investment?
are financial asset categories that are different from
conventional investment categories like - mutual funds, stocks,
bonds, and ETFs. It can be said that this category includes
investment tools that are generally not listed on traditional
Typically, art, wine, classic automobiles, precious metals, rare
stamps or coins, hedge funds, property, etc. are examples of
alternative investment options. Fin-tech companies like
KredX also offer
attractive investment options
that accompany high returns at low risks.
Above all, they follow a different investment approach in terms
of tactic, compared to fixed income or equity investment
options. As a result, they accompany relatively more varied
characteristics and risks, when compared to traditional
investment options. It is said that alternative investments help
individuals to enhance the risk and return aspect of their
Reasons Behind The Popularity Of Alternative Investments:
These pointers below elucidate the reasons that play a crucial
role in increasing the popularity and demand for alternative
- Helps Generate Increased Returns
Alternative investments are more likely to
perform better in the long term, when compared to traditional
investment options. It is mostly because of the availability of
more investment options and relatively fewer constraints.
Typically, they accompany potential returns of up to 50% to
- Inflation-Adjusted Returns
Usually, the 'hard-asset' category tends to out-perform
traditional investment options like stocks and bonds, especially
during the inflationary cycles. The inflation-adjusted returns
help individuals to account for expenses better with their
available disposable income.
- Protection Against Market Crash
Other than these,
alternative investments protect against any
market crash and alleviate individuals' concerns related to the
same. It is mostly because of their low correlation to asset
classes like fixed income or equity markets. Their low
correlation with the market makes them less susceptible to
elements of market-related risks.
KredX extends unique investment options that
prove useful in generating immediate returns. We offer our
investors the chance to park their money in
instruments of blue-chip companies. This, in turn, assures
guaranteed returns against minimal risks.
Facilitates Diversification Of Portfolio
Above all, alternative investment options help
investors to diversify their portfolio. You
must note that it is the correlation coefficient aspect of these
investment options that favour diversification.
This characteristic bodes well with traditional investment tools
For instance, when a stock or bond does not perform as desired,
a private equity fund or hedge fund can help to cushion the
impact of the losses, over time. Other than that, it extends the
flexibility to add, replace, or align assets as per
investors' goals and risk tolerance
Types Of Alternative Investments:
Following are a few popular types under the purview of these
investment options –
This includes investments that are neither traded on the
open market nor financed by banking institutions.
Private debt is leveraged when companies require
additional capital for expansion.
It includes investments made in private companies that
are not listed on public stock exchanges. The
subcategories of private equity include – buyouts,
venture capital, and growth capital.
These funds trade liquid assets and follow several
investing strategies to maximise goals. However, they
are available exclusively to institutional
They serve as a hedge against inflation. The prices of
commodities rely heavily on demand and supply aspects.
It is the biggest asset class in the world. Its
characteristics are somewhat similar to bonds and
equities. Notably, valuation is a challenge with real
These products are usually concerned with the fixed
income market. This investment is generally
characterised as complicated and risky. However, they
offer a customised product mix.
Investing in collectibles usually translates to
purchasing rare or precious items hoping that they will
appreciate over time.
You must note that alternative investment options demand active
fund management. It is because these investment options are
complicated, volatile and often accompany a high level of risk.
Additionally, the extent of returns on
alternative investments depends on the type of
investment tool, especially on its risk-reward aspect.
KredX offers investors a platform to make
above-market returns by investing in a brand new asset class
Having said that it is prudent for investors to be clear about their financial standing, risk appetite,
and estimated earnings before putting their money into
alternative investments. They must also make it
a point to gather ample information about its working in
different setups to maximise the benefits.