What’s the alternative?
Informed Choice chartered financial planner Martin Bamford has been quoted in Investors Chronicle, in an article exploring alternative investments.
With continued volatility across world investment markets, it is easy to understand the appeal of alternative investments including art and fine wine.
Returns from alternative investments tend to be uncorrelated with mainstream investment asset classes, which means they tend to behave differently.
When stock markets are falling, it is not unusual for some alternative investment asset classes to increase in value.
Commenting in the article, Martin pointed at the risks associated with alternative investment funds.
“They do not have the same level of protection as mainstream funds, or a long track record. If you want to invest in alternatives it would be better to pick an area you have a passion for, research it thoroughly and then make investments.”
It is usually the case that alternative investments are not suitable for inclusion within an investment portfolio unless it can represent a small part of a much larger portfolio. This allows the investor to limit their exposure to what can be a very risky asset class.
Where alternative investments do tend to appeal is where the investor also takes a personal interest. This means that the satisfaction of owning the asset can be enjoyed regardless of whether the investment returns are delivered.
Art is a good example of this, with the most suitable investors in art tending to be those who know and love their subject. This passion for an alternative investment also helps to avoid some of the pitfalls associated with buying the asset at an inflated price.
Despite their attractions, alternative investments are likely to remain off-limits for most investors, with the exception of those who are happy to enjoy the aesthetic rather than investment benefits of ownership.
Photo credit: Flickr/Marshall Astor