Types of Alternative Investments
Perhaps the easiest way in which to define the term alternative investments is to think about what you consider to be an investment. Most people would name stocks, bonds, and cash as investments, perhaps even property. There the list might end.
An alternative investment is anything which falls outside of this list of traditional investment asset classes, and can be tangible or intangible assets. The list includes physical assets such as coins and stamps, as well as ‘paper’ investments such as financial futures and options, binary options, forex trading and commodities derivatives. We look at some of these below:
Choosing a Forex Broker
There is a lot more to choosing a broker than picking one with the lowest spread, find out more.
What is Forex Trading?
Forex is about trading or hedging currency pairs. Some of the most commonly traded pairs include EUR/USD, GBP/USD and USD/JPY.
7 Forex Trading Tips for New Marketeers
Some helpful tips to help you profit from the forex market.
Are Managed Forex Accounts a Good Alternative Investment?
I tend to think they can be, but make sure you thoroughly research your traders.
Is Range Trading in Forex a Solid Strategy?
Range trading can work well when the market has no clear direction.
An Overview of Forex Trading Strategies
Having a solid strategy is absolutely critical for success.
Automated Forex Trading Software: Should You Use It?
Personally, I am not generally a huge fan of automated trading, it usually doesn’t stand the test of time. Though some people do manage to have success with it.
Should You Go to Forex Trading School?
Going back to school? Is it worth it?
What is Forex Scalping?
Scalpers aim to profit from very small market movements. Is this type of trading for you?
All About Forex Hosting
Do you need a place to host your automated trading robot?
How to Trade Forex: Getting Started
A basic guide to getting started with the FOREX market.
Is Forex a Bad Investment?
If you have practiced your strategy and have risk capital, it may be a good investment, otherwise it may well just be gambling.
Orange Juice Futures
Dow Jones Futures
Brent Crude Oil Futures
Natural Gas Futures
Let’s Talk Cotton Futures
Hedging with Futures and Options
The Risks of Futures Trading
VIX Futures and Options
What is a Futures Contract?
What Are Oil Futures?
How to Buy Oil Futures
Can Oil Futures Manipulation Affect Prices?
How do Stock Options Work?
Stock options allow you to speculate on the stock market with the option to protect your downside risk.
Can I Make a Living Trading Options?
It is possible, but it may be too risky without being a little more diversified.
The Risks of Option Trading
Options are traded on margin, so they are inherently risky. However, they do allow you do limit your risks very effectively.
A Guide to LEAPs
LEAPs are options contracts that are longer than standard contracts.
Need Oil Options Explained?
Oil Options contracts give you the option of exercising the contract on expiry.
What are Binary Options?
Binary options are a relatively new style of option that either returns a set amount or nothing at all, depending on price action.
Can I Make Money with Binary Options?
It is possible, but the odds do tend to be with the brokerage firm.
Considering Binary Options Demo Account?
Always practice your strategies on a demo account before risking your money with a live account.
Have you got a Binary Options Trading Strategy?
As with any instrument, a good strategy is very important.
Charles Schwab Review
Interactive Brokers Review
Merrill Edge Review
Wells Trade Review
Tradestation Review 2012
Market Club Review: Information, Charting, Education, and Signals in one place
MB Trading Review
Firstrade Review 2012
How to Invest in Copper
Copper prices are volatile which means these stocks can present opportunities as well as risk.
What are Stock Warrants?
Warrants are a derivative contract.
How About Investing in Solar Panels?
Do you think solar panels are the future?
A Guide to the 2001 Tech Crash, or “Dot-Com Bubble”
Markets always go through booms and busts. The 2001 tech crash was quite a bad one.
Is Ethical Investing Something For You?
Some investors prefer to shy away from the less savory companies in society.
What are Volatile Stocks?
Some investors like volatility, as it presents opportunities. Volatile stocks are not for the faint hearted though.
Fundamental Analysis vs Technical Analysis
Both methods of analysis can be useful when weighing up a stock.
How to Invest in Your Children’s Trust Fund
There are few financial decision that are more important than your child’s future security, this is very important to get right.
Top 10 Performing Mutual Funds of 2012
2012 has been a volatile year, who has come out on top?
7 Top IPhone, Android and Tablet Apps For Trading
Do you want to track the latest news and price information on your smart phone?
Saving For Retirement
The ultimate guide to everything relating to retirement including 401ks and much more.
Is Alternative Investing for You?
One of the secrets of making better than average gains from investing in the financial markets is to invest in what you know. Usually this means either conducting your own research and making buy and sell decisions accordingly, or perhaps relying on the analysis conducted by market professionals. You probably already use the services of market professionals to manage some of your investments: retirement funds and mutual funds are invested in this way.
Invest with passion
If you have a hobby or passion, the knowledge that you have acquired in its pursuit would have been built up over a long period of time. You really know your stuff. Perhaps people seek your advice with regards to your particular area of expertise. Have you ever considered investing your money as well as your time in your passion?
Numismatists might build coin collections because they are interested in a particular historical period, or style of coin. Those collections become investments. The same can be said for stamp collectors, comic book readers, and the like.
Perhaps you like the odd glass of wine. You may even have been instructed in wine tasting. What better way to progress this passion than to begin investing in fine wines?
Memorabilia, whether its sports, celebrity, politics, or any number of other things, can not only be entertaining but also prove profitable. Specialist auctions can see millions of dollars change hands, and have you ever been to a baseball card convention?
Cars, horses, real estate, books, toys, and antiques are all areas where people get excited and property change hands. For the enthusiast, hobbies often turn to investment opportunities without the realization that this is happening.‘
Real’ Alternative Investments
Of course, for those that are still not convinced that things like toys, cars, and memorabilia should be considered as investments, then there are a host of ‘real’ alternative investments available.
Physical investment assets would include gold, silver and other precious metals, as well as commodities such as oil, wheat, or orange juice. Forestry property and land, and renewable energy items such as solar panels and wind turbines might also be included in this list.
Non-physical alternative investments are usually complex investments into financial instruments. Buying stocks is, at the base level, fairly easy to understand. A company’s stock will go up if its profits increase and it pays higher dividends (ok, this is very simplistic and not always the case, but a good basis for understanding the difference to alternative investments). Other financial investments work in a far more complicated way. For example, certain hedge funds will use instruments to profit from a falling market, or combination of long and short derivatives, or when markets remain neutral and don’t move up or down.
Other managed funds place investors’ cash into new, privately held companies.
Investment in hedge funds, venture capital companies, and private equity houses are all examples of complex, non-physical alternative investments.
Alternative Investments: the positives and negatives
Alternative investments often move differently to traditional investments products. For example, when the stock market is falling, the price of fine artworks may be increasing.
It’s also possible to generate an income from many alternative investments that might be unavailable for stocks, bonds, or cash. Paintings can often be hired out to galleries; land and property can generate rental income.
There are also potentially high gains to be made from such investments. Coins and stamps can be bought privately and sold at specialist auctions; fine wines, art, and property can produce great profits.
On the downside, many alternative investments suffer because of their uniqueness. Illiquid markets can mean difficulty in pricing and sale, and the costs of doing so may be far higher than those incurred when buying and selling traditional investments (consider estate agency fees on property transactions, or auction house commissions, for example).
Finally, historic information on pricing may be limited, and this in turn could make research a long and difficult process.
If you are willing to assume a little more risk than under many traditional investments, then alternative investments can produce great returns. Of course, that risk is decreased if you conduct full and proper research, or perhaps use your existing knowledge as a base to build on. For those that want to benefit from the opportunities that alternative investments offer but are unable to commit the time to research, then the number of funds that cater to this need is increasing almost daily.
Placing a portion of your investment cash into alternative investments could be a fun way to take a more active part in your investments based upon a lifelong passion, or seeing profits from a managed fund dedicated to more complex financial instruments. The choice is yours: there are plenty of alternatives out there.