Aren Alternative Investments risky?
Some Alternative Investments are risky. Like investing in the stock market, investors in alternative strategies can lose capital. Many people equate the term “Hedge Fund” with the much-publicized blow-up of Long Term Capital Management in 1998. Alternative Investments, however, employ varying strategies. While some of these sacrifice stability for high returns, other strategies have been historically more stable than the bond market. Alternative Investments, however, are not intended as stand-alone investments. Rather, they are promoted for their diversification benefits. Modern Portfolio Theory accepts that a portfolio which blends traditional and non-correlated Alternative Investments can enhance returns and actually mitigate risk.
