3 Common Myths About Alternative Investments  

Although 81% of institutional investors intend to increase the allocation of their funds to alternative investments by 2025, some investors (and advisors) are weary of doing the same. 

Here are three common misconceptions about alternative investments.

Myth #1: Alternative investments are too risky. 

Alternative investments include, but are not limited to: real estate, cryptocurrency, private equity, hedge funds, commodities, collectibles, and luxury items such as art and jewelry. Risk level varies depending on the investment type, among other factors. 

Second, alternative investments are a great way to diversify your portfolio: Something all successful investors advocate for. Diversifying your investment portfolio limits the risk in betting on one single investment type to succeed.  

Lastly, alternatives are not as negatively impacted by dips in the stock market. In fact, some alternatives hedge against market dips, as well as inflation. 

For example, while the market took a plunge in 2020, Bitcoin and gold soared. Additionally, many financial advisors would view a “good year” as a client’s portfolio dipping 20% while the market dipped 50%, for example. But in private equity, success is based on positive rates of return regardless of how the market is performing.  

Myth #2: Alternatives are only for the ultra-wealthy.

Inaccessibility is one of the major issues within alternative investments. For example, most private equity funds require an extremely high investment minimum, often in the millions, in addition to high management fees. And most people don’t meet those requirements.

But there are alternatives that are more accessible. Investors can buy cryptocurrencies such as Bitcoin at fractional shares through platforms such as Coinbase and Robinhood. Gold can be bought via various exchange traded funds (ETFs). Real estate investment trusts (REITs), as well as online funding platforms such as Fundrise, offer a way to invest in shares of real estate.

Myth #3: Alternatives are too complex and complicated to manage.  

It is true that investing in alternatives can be more complex, valuation can be more difficult, and alternatives can be more difficult to manage. But these issues are due to lack of automation, advisors unwilling to allocate to alts, and poor performance tracking technology.

So we created solutions to make it easier for investors. AltExchange’s free platform allows investors and advisors to easily track and manage alternative investments.

By better understanding your entire investment portfolio, you’ll set yourself up for success with a well-diversified portfolio and rewarding returns. 

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