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Alternative Investments Definition

Examples and Mutual Fund and ETF Strategies

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Definition: Alternative investments can be defined to include any investments outside of the mainstream and conventional asset types, such as stocks, bonds, cash, mutual funds or real estate. The term is a broad one but often includes investment assets such as precious metals, jewelry, art, wine, antiques, coins, or stamps, or even sports cards. Other investment types that can be loosely defined as alternative include mutual funds and ETFs that invest in sectors or hedge funds, commodities, currencies and financial derivatives.

Alternative Mutual Fund and ETF Strategies

Investing in alternative investments such as art, coins or stamps can be complex and risky but there are more accessible and prudent means to alternative investing that are not so specialized. Look no further than mutual funds and Exchange Traded Funds (ETFs).

For example, using a good precious metals fund, such as SPDR Gold Shares (GLD) ETF or Tocqueville Gold (TGLDX) can add diversity to an investment portfolio.

However, like any other alternative investment strategy, precious metals funds are specialty sectors that are not diversified and must be used in small amounts. For example, you may try limiting exposure to a percentage of 5% (but no more than 10%) of your total investment portfolio. By adding small percentages, you can add diversity to your portfolio while reducing overall market risk. This is because some asset types, such as gold, can increase in value even as economic conditions are declining. This is a type of hedging strategy.

Disclaimer: The information on this site is provided for discussion purposes only, and should not be misconstrued as investment advice. Under no circumstances does this information represent a recommendation to buy or sell securities.

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