A financial asset that does not fit into one of the traditional investment categories is called an alternative investment. Traditional categories consist of cash, bonds, and stocks. Alternative investments can include private equity or venture capital, hedge funds, managed futures, art and antiques, commodities, and derivatives contracts. Another common classification for real estate is alternative investments.
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Comprehending Alternative Investments
Due to its complexity, lack of regulation, and level of risk, institutional investors and high-net-worth individuals own the majority of alternative investment assets. Particularly when contrasted with mutual funds and exchange-traded funds (ETFs), many alternative investments have high minimum investments and fee structures. Additionally, there are fewer opportunities for these investments to market to potential investors and release performance data that can be verified. Due to lesser turnover, alternative assets usually have lower transaction costs than traditional assets, notwithstanding the possibility of high starting minimums and upfront investment fees.