6 myths of alternative investing

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6 Myths of 6 Myths of Alternative InvestingAlternative Investing

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Myth #1: If you buy enough stocks, bonds and mutual funds, you’re sure

to have a diversified portfolio

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You need investments that perform different functions in your portfolio.

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Alternative investments may respond differently to market conditions than stocks or bonds, which may help improve portfolio diversification.

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With diversification, in any market conditions, while some funds underperform, other will perform well.

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Myth #2: Alternatives are too risky for ordinary investors

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Any kind of investment involve risk. The more you know about it, the better your success.

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There are many types of alternative funds - some are more risky in return for higher returns- some are less risky for modest returns.

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Look out for investments that offers good security. e.g investments with land title deed as collaterals.

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Learn as much as you can, do your research and pick the right one for you.

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Myth #3: Alternative investments are only for the wealthy

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It is true in the past when hedge funds were available only to investors of high net worth and to institution...but

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The time have changed.

Now, individual investors can invest through mutual funds with minimal investments, lower expenses and daily liquidity.

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Myth #4: This isn’t a good time to make strategy changes

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Stocks and bonds are no less risky.

Stocks are based on future expectations which are uncertain.

Bond price falls when interest rates go up.

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It is better to diversify to asset-backed investments with low corelation to minimise the risk.

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Myth #5: Investors do not have access to their capital if they invest in alternatives.

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Although many alternatives are less liquid than tradtional investments, the level of liquidity is specific to each investment type.

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Some are as short as 30 days and as long as 15 years.

A long term investor has to weigh its potential returns and the portion that he is comfortable with.

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At Wealth Solutions, we offer short term investments with tenure as short as 2 years.

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Myth #6: Stock markets will always out perform alternative investments.

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Most people think that stock markets offer a higher return.

Alternatives investments generally have low corelation with the state of economy; it fare better during recession.

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It is prudent to have a mix of alternative and traditional investments in one’s portfolio.

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