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Personal Finance Education

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= THE ELEVATION GROUP = ...

= THE ELEVATION GROUP =
Financial Leverage & Investment Strategies

Website: www.InvestmentSeminars.org

We’re living through the greatest wealth transfer in the history of mankind. It's Your Time. Time To Take Control & Create True Financial Prosperity & Wealth In Your Life. Time To Achieve Higher Levels of Personal Success & Optimal Well-Being. Time To Live a Life of Your Design & Achieve Health, Wealth & Wisdom!



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Personal Finance Education Personal Finance Education Document Transcript

  • “Alternative Investment Strategies For Crazy Markets”During the economic crisis of the past decade, markets and industries crashed and hundreds of companies andmillions of people were caught with their pants down. This ordeal has taught everyone the value of securityduring uncertain times. One of the surest ways to buffer yourself from economic crunches is by making soundinvestments. While there are traditional investment strategies available to first-time investors, alternativeinvestments are rapidly gaining momentum, and for good reason.Alternative Investments: The BasicsAlternative investments refer to investment strategies that go beyond traditional investments like stocks, bonds,cash, or property. Popular financial assets in the alternative investment category are:Hedge Funds, Private Equities, Financial Derivatives, Venture Capital&CommoditiesThey also include several tangible assets including, but not limited to, the following:Wine, Antiques, Stamps, Art, CoinsCharacteristics of Alternative Investments:Unlike traditional investment strategies, alternative investments are not direct fixed-income or equity claim onthe assets of an issuing body. They are complex in nature, so most of these assets are held by accredited, highnet-worth individuals. They also tend to lack liquidity and have a low correlation to traditional financialinvestments such as shares of stock in a company. This low correlation adds to its appeal, especially withinvestors who are looking to diversify their investment portfolio (the low correlation coefficient will bediscussed in depth in a later section).Also, compared with more common investments like mutual funds, alternative investments have higherminimum investment requirements and fee structures. The cost of purchase and sale is relatively high. Inaddition, they are subject to less regulation. While this may be good on one hand, it also has the effect oflimiting opportunities to publish verifiable performance data. Hence, historical data on risk and returns may belimited. This data could be useful in promoting an alternative investment to potential investors.Because current market values of some forms of assets are difficult to determine at the least, it is imperative forinvestors looking to invest in alternative investments to conduct proper due diligence. This especially applies totangible assets like artworks and wine.Some investors consider alternative investments as a good means to diversify their portfolio, thereby reducingoverall investment risk. However, this is not the only reason why more and more investors are now looking intoexpanding their financial prospects via alternative channels.The Appeal of Alternative Investments: Low Correlation, Absolute Return
  • Although there are a number of alternative assets presently being offered in the marketplace, a commoncharacteristic among these numerous options is their low correlation coefficients with both fixed income andequities. Low correlation is considered important when choosing assets for inclusion in a portfolio, primarilybecause assets that are relatively uncorrelated with both bonds and stocks tend to have minimal exposure tosystematic market risk factors. Absolute Return Strategies - strategies that seek a low correlation to systematicrisks in the market, make it their objective to attain relative independence from the underlying equity or fixed-income market benchmarks overall performance.Absolute return does not come without its challenges, however. There are potential constraints on the upside.To illustrate, when broader stock markets are picking up, investors with low-correlation alternatives may seetheir portfolios performing weaker in relation to those with traditional assets. This somehow implies thatabsolute returns can be maximized in negative market climates and tend to underperform during positiveeconomic climates.The Economic Atmosphere for Alternative InvestmentsIt would not be an understatement to say that alternative investments were, for the longest time, reserved mostlyto high net-worth investors. The broader retail market finds the field of alternative investments difficult topenetrate because of reasons mentioned earlier in this article:- High minimum investment sizes;- High minimum fee structures; and- Assets with no liquidity.Recent years show a change - an evolution - in the economic atmosphere, where alternative investments areconcerned. Progress in global financial markets has developed and provided greater opportunities and a widerrange of products through which more investors can enrich their portfolios with alternative assets. Directionalalternative assets like commodities, real estate and foreign currencies, as well as hedge strategies like buy-writebecome accessible to more investors through exchange-traded funds (ETFs), exchange-traded notes (ETNs),and mutual funds.These options were not available until recently. With increasing entry points into alternative investments,investors now find themselves able to participate in innovative investment approaches that promise increasedprofits. If alternative investments appeal to you, now would be the best time to start investing in alternativeassets.Website: www.InvestmentSeminars.org