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5 reasons for alternative investments

Feb 7th 2020 at 9:45 PM

Alternative investments have grown rapidly in importance in recent years. Their market volume has grown twice as fast as that of conventional systems since 2005. They differ from other asset classes in their earnings and risk profiles.

Also, according to a study, there will be annual growth of 10% in this area in the future. So far, private equity alternative investments have mainly been used by institutional investors to diversify their portfolios. 

Now, more and more retail investors are dealing with this way of investing money. Here we present you with 5 reasons for alternative investments:

1. Financial repression:

The zero interest rate policy continues to push the yields on government bonds with a solid credit rating into negative territory. However, with negative returns, bonds no longer fulfill their traditional role as income investments. That is why more and more investors are looking for extraordinary yield objects and sources. Alternative investments come into focus.

2. High volatility on the stock market:

Political uncertainties or incidents of global scope, such as Brexit or the trade dispute instigated by Donald Trump, also affect share prices in this country. Fluctuating prices unsettle many investors who are on the wrong side of the curve. You are therefore looking at alternative forms of investment so that you are not solely dependent on the risky equity investment.

3. Diversifying needs:

In the “good old days” you could still diversify by investing in different asset classes and geographical regions. However, the global markets are now so closely interwoven that it no longer works so easily. Alternative investment capital helps to shield investors' capital against fluctuations in conventional markets.

4. Alternative investments are now accessible to everyone:

The group of investors in alternative asset classes previously only consisted of large institutional investors; now it is expanding to private investors. 

So far, you had to be a millionaire and best of all be friends with an investment manager to be able to invest directly in alternative investment strategies. 

5. Crowd investing in real estate:

There is a perfect example of the growth of alternative investments in the real estate market. Although real estate investment has existed for a long time, small investors have so far not been able to invest directly in real estate projects with small amounts.

In this way, the term alternative investments describe investments in non-traditional investment products (stocks, bonds, fixed-income securities, investment funds, and other listed securities).

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