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"Alternative investments" is an umbrella term for a disparate range of investment strategies and assets that might be best defined as investments that use a different approach from traditional instruments.  Alternative investments are geared to "accredited" or "qualified" investors who are considered high-net-worth individuals with investment experience, and these investments usually have high minimum investment requirements.

While today's portfolios may benefit from some diversification to alternative investments, it should be emphasized that the risk, return, and market correlations will vary widely among them. Consequently, individuals need to consider what their objective is for adding alternative investments and select the appropriate strategy to pursue their needs.

Types of Alternative Investments

Private Equity: Seeks to participate in the growth of private companies. Private equity is an illiquid asset class that seeks long-term appreciation away from public markets.

Hedge Funds: Investments that have broad flexibility in the types of strategies they can employ to follow their stated investment objectives.

Commodity Pools: Enterprises that attract funds from people who are looking for pool managers to engage in commodity-related trades. 

Structured Products: Pre-packaged investments that normally include assets linked to interest plus one or more derivatives.

Real Estate: Investors who purchase investment properties such as office buildings, residential apartments, and vacation housing. Money may be gained from rental income, wholesaling, or flipping.

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