Investment and risk diversification – in your investment portfolio
Let’s start with the question – what are alternative investments?
The traditional investment portfolio mainly includes stocks and bonds, but it’s time to move forward. This has been internalized by many investors who have discovered the field of alternative investments in recent years. These are financial instruments, which are based on non-tradable investments in various fields such as real estate in Israel and abroad, hedge funds, private investment funds, commodities and other innovative trading methods.
What are the main types of alternative investments?
- An initiation project – the purchase of a plot of land, the construction of a building and the sale of the apartments in it, or the rental and sale of the entire property as a yield-bearing asset. Distribution of revenue: fund + yield/interest after realization.
- A yield-bearing project – the purchase of an existing property that has been used for residential or commercial purposes, which includes tenants, the improvement of the property and its sale in a pre-defined period. Distribution of revenue: yield/current interest that is distributed on a quarterly basis + additional distribution of profits after realization.
What raised the value of alternative investments in recent years?
Full disclosure: Alternative investments are not new players in the investment field, but they are undoubtedly players that have made their mark recently. How did this happen? We will now present the main reasons why alternative investments are gaining popularity among many investors in recent years:
- Because it is necessary to diversify the investment portfolio while diversifying risks – in a period characterized by zero interest rates, and when the trend of many investors is to diversify risks across many avenues in order to reduce risks and increase returns in the portfolio – the integration of alternative investments in the investment portfolio is a desirable move.
- Accessibility due to competition – in the past, alternative investments were reserved for serious investors only. Today, the high competition and the multitude of instruments in the field have made alternative investments accessible to the general public at low prices compared to the past. This way the investing public is exposed to new areas, and this way everyone can enjoy the benefits of alternative investments.
- No influence on the volatility of the capital market – the alternative investment instruments are not affected by the volatility of the capital market. This is a significant advantage that contributes to building a balanced investment portfolio.