Why Alternative Investments?
This three-part series will cover all you need to know about alternative investments. Click below to read the previous or next article.
- Part One – Alternative Investments – What are My Options?
- Part Two – Why Alternative Investments?
- Part Three – Alternative Investments – The Pros and Cons
It is useful to consider a risk/return analysis. The chart below provides the range of returns that are available for different categories of investments.
As shown on the above graph, investment categories such as cash, bonds and property have the lowest risk percentage. These categories also have the lowest returns. The graph shows that generally, the greater the risk the greater the reward. Alternative investments such as venture capital, private equity, private company and mezzanine capital carry a higher risk compared to cash, bonds and property. These alternative investments however come with much greater returns. These greater returns are an advantage of investing in alternative investments.
Like any investment, alternative investments come with benefits to the investor, as well as potential risks. Part Three will explore the pros and cons of investing in alternative investments.