Why should alternative investments find a place in your investment portfolio?
A well-balanced investment portfolio confers peace of mind. It ensures that you have covered all your bases and even in the eventuality that one investment is a bad choice you will not land on hard ground but will have some cushioning effect from the other options in your portfolio. That brings us to alternative investments.
What are alternative investments?
Stocks, bonds and cash are considered to be the traditional and conventional forms of investment while commodities, derivatives, hedge funds, and private equity are considered to be alternative investments. The latest to join this section are cryptocurrencies and more specifically bitcoin.
In fact, many investment gurus advise people to allocate at least 5-10 % of their investment portfolio to alternative investments for a safe retirement.
Advantages of alternative investments
Besides tax benefits, the following reasons make alternative investments a must-have in your portfolio.
- Can withstand the market volatility: When you invest in assets that have little or no relation to the market condition you are providing a cushion for yourself from the instability rampant in the market. A volatile market creates panic in investors and they react hastily leading to further turbulence in the market. But alternatives are natural hedges and unaffected by these myopic investors.
- Transaction costs are low: Traditional stocks and bonds have high turnovers and hence the traditions costs are also very high but with alternative investment even though the upfront fees are high they are not riddled by high transaction costs.
Bitcoin as an alternative investment
Despite being volatile bitcoin has become a favorite of the masses because it is having a wonderful journey and the prices are picking up again. The advantage bitcoin has over the more “traditional” alternative like gold and hedge funds are that it can rises really quickly and especially those who have remained patient throughout the tumultuous journey of bitcoin has reaped the price of their faith and their investments have not sunk or just floated but have emerged strong and tall.
In comparison, gold takes unusually long to show a positive trend and hedge funds have to deal with other parameters to bounce back. In fact, there are a few hedge funds which have included bitcoin in their portfolio which is reason enough to give this crypto its due.
You can make hay when the sun shines too buy checking out any of the automated trading robots dealing in cryptocurrencies available online. Like always, though make a wise decision only after reading a review here.