Alternatives complement traditional portfolios
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Investment types |
Traditional investments |
Alternative investments |
Capital preservation |
Growth | Income | ||||||||||||
Equities |
Large, mid, small, growth, value, international, emerging markets |
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Fixed income |
Treasuries, high-quality corporate and municipal bonds |
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Real assets |
REITs, long-only commodity |
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Investor considerations
Investing in alternatives is different than investing in traditional investments such as stocks and bonds. Alternatives tend to be illiquid and highly specialized. In the context of alternative investments, higher returns may be accompanied by increased risk and, like any investment, the possibility of an investment loss. Investments made in alternatives may be less liquid and harder to value than investments made in large, publicly traded corporations. When building a portfolio that includes alternative investments, financial professionals and their investors should first consider an individual’s financial objectives. Investment constraints such as risk tolerance, liquidity needs and investment time horizon should be determined.