Debra has worked in the financial industry for over 25 years for large financial firms out of NYC. She now has created on-line courses to help everyone get the financial education they need to start investing and reach their financial goals.
Courses here – http://debraohstrom.com/courses
Youtube channel – https://www.youtube.com/@FemmeFiShow
What are Alternative Investments Summary
In today’s financial landscape, alternative investments have become increasingly popular among investors looking to diversify their portfolios beyond traditional stocks and bonds. But what exactly are alternative investments, and why should you consider them? Let’s break it down.
What Are Alternative Investments?
Alternative investments encompass a wide range of assets outside the realm of conventional stocks and bonds. These may include:
- Hedge funds
- Private equity
- Private credit
- Real estate
- Commodities
- Collectibles (e.g., art)
Each of these investment types comes with its own unique risk-return profile, making them attractive options for portfolio diversification.
Why Consider Alternative Investments?
The primary appeal of alternative investments lies in their ability to complement traditional investment mixes. By incorporating these assets into your portfolio, you can potentially:
- Smooth out your overall investment experience
- Enhance returns
- Mitigate losses during market downturns
Key Considerations Before Investing
While alternative investments offer potential benefits, they also come with some important caveats:
- Liquidity: Many alternative investments are illiquid, meaning your money may be locked up for 5-10 years. Ensure you won’t need these funds during the investment period.
- Complexity and Fees: These investments can be more complex than traditional options and often come with higher fees.
- Minimum Investment Requirements: Due to their unique nature, alternative investments may have higher minimum investment thresholds compared to stocks or mutual funds.
- Accredited Investor Status: Some complex investments are only available to accredited investors who meet specific financial criteria.
The Changing Landscape
The good news is that the alternative investment landscape is evolving. Many firms are working to:
- Increase accessibility by registering funds with the SEC
- Lower minimum investment requirements
- Provide more opportunities for non-accredited investors
However, it’s crucial to remember that these changes don’t eliminate the need for careful consideration of factors like lock-up periods and fees.
Alternative investments can be a valuable addition to your investment strategy, offering diversification and potential for enhanced returns. However, they require careful consideration and a clear understanding of their unique characteristics. As with any investment decision, it’s essential to do your research and consider consulting with a financial professional before diving in.
Stay tuned for more in-depth explorations of specific alternative investment types in future posts!
What are Alternative Investments Transcript
00:00:01 hi everyone today I’m going to go over and give you a very straightforward explanation on what are alternative Investments what the pros and cons are for investing in these types of uh opportunities and why they’re so popular so for those of you who don’t know me my name is Deborah Ostrom I worked in the financial industry for over 25 years I created this channel so that everyone can get information that’s e easy to understand to help them make better decisions I have a website with courses check out the links below and as always
00:00:38 please subscribe and like this channel so that you can get notified whenever I drop a new video first off what are alternative Investments and this is a term that I think has become basically a cat all bucket for any investment outside of the traditional stocks and bonds there are many types of Alternatives you may have heard of hedge funds private Equity private credit and some investors consider real estate uh or Commodities also to be in this bucket and even things like art or other Collectibles but please keep in mind
00:01:25 that each of these types of Investments all have different pros and and cons and different risk return profiles the reason why investors like these types of Investments is that they can complement their traditional stock and bond investment mix that they may already have and since each of these do have their own unique risk return profile it can help smooth out the investor experience over time give them stronger returns s and hopefully ease those years when there may be losses so one thing to keep in mind is
00:02:10 that many of these alternative Investments are not liquid the way traditional stocks and bonds are which means they’re not easily sold or bought and it may lock up your money for five and 10 years so you want to be very mindful of what those uh rules are around each investment how long your money is going to get locked up for and make sure that you will not need that money uh during that time period the other item to keep in mind is that because these Investments um are less liquid they can be more complicated there could be
00:02:53 higher fees associated with investing in them the third thing I will mention is that because they are uh more unique and can be more complex there may be a higher minimum investment requirement than investing in mutual funds or ETFs or stocks which are very easy now to invest in for everyone in a very small dollar amount but the same cannot be said for Alternatives the fourth item I want to mention is that because some of these Investments are complex the companies that offer them may not want to register them with the SEC and what
00:03:36 that means is only certain types of investors that meet certain types of criteria will be able to invest in them and that’s usually called an accredited investor you need to have at least a million dollars outside of your primary residence or earning at least $200,000 a year as an individual or 300 $1,000 a year as a couple in the past few years the other way to be designated as an accredited investors if you work within the financial industry and have certain licenses or designations the other thing that is
00:04:17 happening within the industry is that many companies want to give more people more access not just people that can that can meet that accredited investor status so many of these investment firms are starting to go to the SEC registering funds that um can give people more access and many investment companies are also trying to bring down those minimums so that it is more accessible to more people but that does not change the fact that you do still need to understand all of the items I mentioned before about
00:04:58 lockups about fees um just to make sure that the money you are putting in there is longterm money so as I mentioned I’m going to do a deeper dive in individual videos on all of these types of Alternatives check out my links below if there’s any other topics that you would find interesting put it in the comments and we can answer it at another time