Alternative Investment has increased popularity worldwide over a decade. But it has some limitations and way different from the conventional investment option. Although both the investment option – Alternative and conventional has the same degree of risk the former is meant for the high worth investors.
Alternative Investment is investing in commodities other than cash, bonds, and stocks. The investment is made in commodities like wine, arts, gold, real estate, hedge funds, and other tangible assets.
JP Maroney, founder of Harbor City Capital Corp., a global alternative investment group specializing in buying, building and monetizing digital assets. Harbor City Investments is based in Melbourne, Florida.
Dedicated to Professional Investors and Institutions:
This is not dedicated to unprofessional investors. It is usually operated by professional investors and institutions, the reason being its complex nature, and only high net worth investors can access these resources.
For example, investing in stocks and bonds may not require hefty funds rather it all depends upon the investor the amount of money they want to invest. But alternative options are the opposite. If they want to invest in real estate or gold, the people must have large funds available for investment.
Unpredictable:
Although, both the investment types are hard to predict in a conventional method you can study the chart, analyze the past trend and make a move according to the prevailing market condition but alternative investments are hard to predict.
For example, the price of the real estate market is unpredictable. They are based on several parameters like supply and demand, demographics, economic growth, and many others. They keep on fluctuating with time.
Unusual Return:
Both the profit or loss is at an extreme level. It requires a huge investment and the market trends are tough to predict. Say, for example, you purchased the property at $400,000 and after some time, the price of the property falls to $300,000 making you suffer a huge loss of $100,000.
Similarly, the price of the same property can shoot up at $500,000 making you gain $100,000.
So, in alternative investments, there are chances of huge gains as well as a huge loss. Unlike traditional options, you cannot make the judgment of when to exit the market.
High Maintenance:
Due Diligence is an important factor in any type of investment. Before investing the hard-earned money it is important to know about the option. People have to study a lot of options at a single time. Many will seek advice from an expert which is again a costly affair.
Alternative investments require a high level of research. Though this pre-requisite is hard to fulfill because of the complex nature of the security.
Illiquid:
Because of the exorbitant nature, investors face it challenging to find the right buyers.
For example, cryptocurrency is hard to sell. Although, it is not regulated by the SEC, but the Government may impose the restrictions on buying and selling the commodity.
