Rocket Dollar News

Alternatives Assets as a Hedge Against Market Downturns

Written by Thomas Young | April 14 2023

When most people think of investing, they typically think of stocks, bonds, and mutual funds. However, there are also alternative investments that can be used as a hedge against poor market performance. In this blog post, we’ll explore what alternative investments are and how they can be used to protect your portfolio.

What are Alternative Investments?

Alternative investments are investments that don’t fit into the traditional categories of stocks, bonds, and cash. They can include investments in real estate, commodities, hedge funds, private equity, and more. These investments often have a low correlation to traditional investments, which means they may perform differently in different market conditions.

How can Alternative Investments be used as a Hedge?

When markets are performing poorly, it can be a good idea to diversify your portfolio with alternative investments. This can help to protect your portfolio from market volatility and reduce the overall risk of your portfolio. Alternative investments can also provide a steady stream of income, which can be especially beneficial during times when traditional investments are performing poorly.

Real Estate: One alternative investment that can be used as a hedge against poor market performance is real estate. Investing in real estate can provide a steady stream of rental income, as well as the potential for capital appreciation over time. Real estate also has a low correlation to traditional investments, which means it can provide diversification benefits to your portfolio.

Commodities: Another alternative investment that can be used as a hedge against poor market performance is commodities. Commodities are physical goods that are traded on exchanges, such as gold, oil, and wheat. Investing in commodities can provide a hedge against inflation, as well as diversification benefits to your portfolio.

Hedge Funds: Hedge funds are another alternative investment that can be used as a hedge against poor market performance. Hedge funds are investment vehicles that use a variety of strategies to generate returns, such as long-short equity, global macro, and event-driven. Because hedge funds use a variety of strategies, they may be able to generate positive returns even when traditional investments are performing poorly.

Private Equity: Private equity is another alternative investment that can be used as a hedge against poor market performance. Private equity involves investing in private companies that are not publicly traded. Private equity investments can provide high returns, but they also come with high risks.

Using alternative investments as a hedge against poor market performance can be a smart move for investors who want to protect their portfolios. Alternative investments can provide diversification benefits, as well as a steady stream of income. Some popular alternative investments include real estate, commodities, hedge funds, and private equity. If you’re interested in using alternative investments as a hedge, be sure to do your research and consult with a financial advisor to determine which investments are best for your portfolio.