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Business Insider

Alternative Investments; why alternative?

While, I was reading an article in one of the finance magazines a couple of days back, I came across a term called Alternative Investments.

Alternative investments - I believe - is a generic or rather a more relative term and can have several different meanings if looked at from different perspectives.

For instance, for risk-averse or conservative types of investors, a good investment option to consider would be fixed deposits, PPF and the like; basically Government securities that promise guaranteed returns based on the prevailing interest rate. For this type of an investor, who is risk averse but wants decent returns, “Financial Security” seems to be the main objective and hence he/she would ideally prefer investing in Government bonds or securities.

In this case, the alternative option - would be to invest in the equity market (shares) or Mutual Funds.

However, if the investor wants huge returns but is lacking substantial funds at that point in time; but wants to invest and grow money quickly, then shares CANNOT be a suitable option. Mutual funds, here, would be a good option that invest in the capital market through AMC’s. So, the investor doesn’t need to invest as much as incase if he was thinking of buying shares of a particular company.

So, in the second case, mutual funds is an ideal option while shares can be considered as an alternative for faster growth of money; depending of course on the stock market and economic conditions.

Basically, an alternative investment is nothing but a form of collective investment wherein instead of an individual, there’s a cluster of investors whose objectives are similar. The money is managed by a financial body with the primary motive of investors’ benefit.

Generally speaking, alternative investments refer to hedge funds and private equity funds.  However, the broad range of such form of investments fund includes all investment funds (including real estate funds, debt as well as equity funds).

So after assessing each investment avenue, you can opt for the one that best suits you. Else there’s always gold, silver, currency - many alternatives! Good luck with investing!