The Alternative Financial Strategies investment category includes:
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managed futures funds
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private equity funds
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hedge funds
We also offer a recommended list of Alternative Investment Mutual Funds in the following categories:
- Long/Short
- Market Neutral
- Global Allocation
- Arbitrage
- Multi-Strategy
We classify Alternative Financial Strategies as Alternative Investments because there is a history of low or non-correlation to traditional stock and bond investments.Please read below to understand more about correlation, low correlation, and non-correlation.
When added to a traditional investment portfolio, Alternative Financial Strategy investments offer the potential for more effective diversification, lower correlation to traditional investments, and reduced portfolio volatility.
Investors should note that diversification does not assure against market loss and there is no guarantee that a diversified portfolio will outperform a non-diversified portfolio.
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Correlation is an important concept to grasp in order to understand and appreciate Alternative Financial Strategy Investments and how they can add potential value to a portfolio.
Correlation refers to how securities perform or asset prices move in relation to one another. A correlation of 1.0 indicates that two securities or assets move in exactly the same direction. A correlation of negative 1.0 indicates movement in exactly the opposite direction. A zero correlation indicates no relation in the movements of securities or asset prices.
Alternative Financial Strategy Investments have a history of low and non-correlation to traditional stock and bond investments, and as a result have the potential to behave differently in varying market conditions.
Low correlation has the potential to moderate the effect on the portfolio from shocks that may hit certain markets, asset classes, or investments. If an investor's goal is to secure higher returns at a lower level of risk, then adding alternative investments to the traditional portfolio may be an attractive option, although there are no guarantees regarding performance.
Investing in alternative investments may not be suitable for all investors and involves special risks such as risk associated with leveraging the investment, potential adverse market forces, regulatory changes, and potential illiquidity. There is no assurance that the investment objective will be attained. Investors must meet specific suitability standards and understand these investments are for a long-term investment horizon.
