Schwab Alternative Investments: 101 Ways to Diversify Your Portfolio

What are Alternative Investments?

Alternative investments are investments that fall outside the traditional categories of stocks, bonds, and cash. They include a wide range of assets, such as private equity, real estate, commodities, and hedge funds.

Why Consider Alternative Investments?

Alternative investments can offer several benefits to investors, including:

• Diversification: Alternatives can help to diversify your portfolio, which can reduce your overall risk.
• Return enhancement: Alternatives can potentially generate higher returns than traditional investments.
• Inflation protection: Some alternatives, such as real estate and commodities, can provide protection against inflation.

Types of Alternative Investments

There are many different types of alternative investments, each with its own unique risk and return profile. Some of the most common alternatives include:

• Private equity: Private equity involves investing in privately held companies. This can be a high-risk, high-reward investment, but it can also offer the potential for significant returns.
• Real estate: Real estate is a tangible asset that can provide both income and appreciation. There are many different ways to invest in real estate, such as buying rental properties, investing in real estate investment trusts (REITs), or participating in crowdfunding.
• Commodities: Commodities are raw materials, such as oil, gold, and wheat. They can be a volatile investment, but they can also provide diversification and inflation protection.
• Hedge funds: Hedge funds are actively managed investment funds that use a variety of strategies to generate returns. They can be a complex and risky investment, but they can also offer the potential for high returns.

How to Invest in Alternative Investments

There are several ways to invest in alternative investments. You can invest directly in an alternative asset, such as buying a rental property or investing in a private equity fund. You can also invest in alternative investments through a fund of funds, which is a fund that invests in a portfolio of alternative investments.

Risks of Alternative Investments

Alternative investments can be more risky than traditional investments. Some of the risks associated with alternatives include:

• Illiquidity: Alternatives can be illiquid, which means that it may be difficult to sell them quickly.
• Volatility: Alternatives can be more volatile than traditional investments, which means that their value can fluctuate significantly.
• Complexity: Alternatives can be complex and difficult to understand. This can make it difficult to evaluate the risks and rewards of investing in them.

Conclusion

Alternative investments can be a valuable addition to a diversified portfolio. However, it is important to understand the risks involved before investing in alternatives. If you are not comfortable with the risks, you should consider investing in traditional investments instead.

101 Ways to Diversify Your Portfolio with Schwab Alternative Investments

Schwab offers a wide range of alternative investments that can help you diversify your portfolio. Here are 101 ways to do it:

1. Invest in a private equity fund. Private equity funds invest in privately held companies. This can be a high-risk, high-reward investment, but it can also offer the potential for significant returns.
2. Buy rental properties. Rental properties can provide both income and appreciation. You can invest in single-family homes, multi-family homes, or commercial properties.
3. Invest in REITs. REITs are real estate investment trusts that own and operate a portfolio of real estate properties. REITs offer a way to invest in real estate without having to buy and manage physical properties.
4. Participate in crowdfunding. Crowdfunding platforms allow you to invest in real estate projects, businesses, and other ventures. This can be a way to get involved in alternative investments with a small amount of money.
5. Buy commodities. Commodities are raw materials, such as oil, gold, and wheat. They can be a volatile investment, but they can also provide diversification and inflation protection.
6. Invest in hedge funds. Hedge funds are actively managed investment funds that use a variety of strategies to generate returns. They can be a complex and risky investment, but they can also offer the potential for high returns.
7. Invest in managed futures. Managed futures are a type of hedge fund that invests in futures contracts. Futures contracts are agreements to buy or sell a commodity or other asset at a set price in the future.
8. Invest in volatility funds. Volatility funds are a type of hedge fund that invests in volatility. Volatility is a measure of how much the price of an asset fluctuates.
9. Invest in tail risk funds. Tail risk funds are a type of hedge fund that invests in assets that are expected to perform well in the event of a market downturn.
10. Invest in distressed assets. Distressed assets are assets that have fallen in value due to financial distress. They can be a risky investment, but they can also offer the potential for high returns.

These are just a few of the many ways that you can diversify your portfolio with Schwab alternative investments. Talk to a Schwab financial advisor to learn more about alternative investments and how they can fit into your financial plan.

Frequently Asked Questions

Q: What are the benefits of investing in alternative investments?

A: Alternative investments can offer a number of benefits, including diversification, return enhancement, and inflation protection.

Q: What are the risks of investing in alternative investments?

A: Alternative investments can be more risky than traditional investments. Some of the risks associated with alternatives include illiquidity, volatility, and complexity.

Q: How do I invest in alternative investments?

A: There are several ways to invest in alternative investments. You can invest directly in an alternative asset, such as buying a rental property or investing in a private equity fund. You can also invest in alternative investments through a fund of funds, which is a fund that invests in a portfolio of alternative investments.

Q: What is the minimum investment required to invest in alternative investments?

A: The minimum investment required to invest in alternative investments varies depending on the investment. Some alternatives, such as private equity funds, may have high minimum investment requirements. Others, such as REITs and managed futures, may have lower minimum investment requirements.

Q: Are alternative investments right for me?

A: Whether or not alternative investments are right for you depends on your individual circumstances and investment goals. If you are not comfortable with the risks involved, you should consider investing in traditional investments instead.