Alternative investments provide opportunities to invest in products that are sold directly to individual or institutional investors rather than being traded on an organized exchange or marketplace. In some cases, the investments aren’t regulated by federal or state agencies, though there are generally rules that govern who can invest. That determination is based on net worth and current income, and varies from product to product.
Most alternative investments require you to commit your money for at least a minimum period, sometimes ten years or longer, and carry higher initial and performance-based fees than most other investments. They are rarely transparent, which means it is difficult to determine how they operate and where they stand financially.
Depending on the approach an investment’s managers take and the objectives they are trying to achieve, alternative investments may provide substantially higher than average returns. But because they are often highly leveraged and very speculative, they also carry substantial risk.
