{"id":7326,"date":"2014-01-13T14:14:23","date_gmt":"2014-01-13T22:14:23","guid":{"rendered":"http:\/\/www.marketriders.com\/investing\/?p=7326"},"modified":"2025-10-21T08:45:16","modified_gmt":"2025-10-21T15:45:16","slug":"invest-alternatives","status":"publish","type":"post","link":"https:\/\/www.marketriders.com\/investing\/invest-alternatives\/","title":{"rendered":"How to Invest In Alternatives"},"content":{"rendered":"

Spend a few hours on trading websites and you’re likely to run into a lot of advice regarding “alternative” investments.<\/p>\n

Much of the talk will be about investing in gold<\/a>, both pro and con, but nearly anything that’s not a stock or a bond could be lumped into this category, even artwork and jewelry if you stretch the idea far enough.<\/p>\n

What all of the discussions have in common is the notion that you need some kind of counterbalance to traditional investment vehicles<\/a>. Typically, the idea is to “hide out” when markets get rough or to hedge your bets.<\/p>\n

\"\"<\/p>\n

Should you buy alternative investments? Yes, some, but make sure that you keep things within reasonable boundaries in terms of your personal taste for risk.<\/p>\n

Here are some guidelines for investing in alternatives for retirement:<\/p>\n

1. Understand volatility<\/strong><\/p>\n

“Volatility” is how much a given investment rises and fall over a set period of time. Fixed-income investments are less volatile, normally, than blue-chip stocks. Small-cap stocks are more volatile than big consumer stocks. Precious metals can be a roller coaster, as well as emerging market stocks and foreign bonds.<\/p>\n

Your reaction to that volatility<\/a> is what matters. That’s why it’s important to maintain a strong sense of how much up and down you can stomach and, thus, how many high-volatility investments you should own.<\/p>\n

2. Get a grip on liquidity<\/strong><\/p>\n

A stock or bond is “liquid” if you can easily buy or sell it during normal trading hours. As you can imagine, a major U.S. corporation has many institutional buyers and and sellers. Meanwhile, a tiny “micro-cap” stock might have a dozen or fewer at any given moment.<\/p>\n

Liquidity<\/a> directly affects your ability to enter and exit positions, so be aware of how many other investors are involved in any given investment you may consider.<\/p>\n

3. Diversify<\/strong><\/p>\n

It’s extremely hard to value companies. People who do it for a living get it wrong on a regular basis. Big money managers diminish this risk by putting their eggs in many baskets.<\/p>\n

As a retail investor, this used to be hard. Then along can exchange-traded funds (ETFs). As a result, you can now diversify your investments<\/a> even in less traditional asset classes by owning an ETF of the sector or asset itself.<\/p>\n

4. Know what you own<\/strong><\/p>\n

What’s under the hood? Owning an ETF<\/a> is not a free pass to avoid your investing homework. Read the ETF prospectus and study the performance of the fund relative to the benchmark it purports to track.<\/p>\n

As with any fund investment, a verifiable track record is a reassuring sign, but make sure that the fund hasn’t changed its mission before buying.<\/p>\n

5. Rebalance, always<\/strong><\/p>\n

The principle of rebalancing<\/a> still applies. As any given asset class outperforms, take gains and use the proceeds to buy back into those that lag.<\/p>\n

You can use alternatives to improve your portfolio’s long-term performance. Just keep the weightings reasonable and absolutely avoid “all in” bets that amount to little more than market timing<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"

Spend a few hours on trading websites and you’re likely to run into a lot of advice regarding “alternative” investments. Much of the talk will be about investing in gold, both … Read more →<\/span><\/a><\/p>\n","protected":false},"author":8,"featured_media":13981,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_wp_rev_ctl_limit":""},"categories":[7],"tags":[62,43,37],"yoast_head":"\nHow to Invest In Alternatives | MarketRiders<\/title>\n<meta name=\"description\" content=\"Should you buy alternative investments? Yes, some, but make sure that you keep things within reasonable boundaries. 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