Alternative Investments

The potential to generate higher returns usually comes with higher risks and alternative investments are no different. They may not be suitable for all investors and involve special risks such as:

Illiquidity:

Alternative investments typically require longer investment commitment periods and there's generally no secondary trading market. Investors are subject to lengthy lock-up periods and generally cannot access their money during this time. Some alternative investment funds have quarterly redemption periods and require investors to submit redemption requests 60-days or more in advance. Other alternative investments, like private equity, typically have no redemption mechanism and investors must be willing and capable to commit capital for the life of the investment, which can be more than 10 years.

Costs:

Generally speaking, the fees and expenses associated with alternative investments are often higher than those of traditional investments.

Leverage:

Alternative investments generally employ borrowing strategies (leveraging) to help enhance the chance of higher returns, which can also increase potential losses and higher risk for investors.

Limited transparency:

Due to their product structure, alternative investments afford investors limited visibility into the underlying investments and their valuations.

Tax reporting:

Investing in alternative investments can often impact federal, state, and local income tax returns for investors.

Performance reporting:

Alternative investment performance typically lags the performance reporting of traditional fixed income or equity investments like mutual funds or ETFs.

Speculative nature:

Alternative investments are highly speculative and there's no guarantee that investing in them will be successful, produce positive returns, or that the investments will achieve their intended investment goals.

Find out if alternative investments are right for you. Get matched with a financial advisor.

Investing in alternative assets has historically been limited to financial institutions or high-net-worth individuals who can understand the risks associated with such investments. This is because most alternative investments are private offerings that are not traded on public markets. To learn more about how alternative investments can fit into your portfolio, talk with a financial advisor.